Stocks extended gains and the dollar edged lower as traders pared bets on an interest-rate hike after United States Federal Reserve chairman Kevin Warsh refrained from backing the case for tighter policy despite this week’s faster-than-expected inflation data.
MSCI’s Asia Pacific equities gauge climbed 1.6%, while futures for the S&P 500 Index erased losses of as much as 0.6% to climb 0.2%.
The modest uptick in sentiment – stocks were already higher as a rout in chip stocks eased – came after Warsh’s comments about the benefits of artificial intelligence (AI) to the US economy. He made no specific reference to monetary policy.
“Warsh’s refusal to commit to another rate hike is resulting in some Fed-rate-hike bets being unwound,” said Charu Chanana, chief investment strategist at Saxo Markets. “His comment that ‘I don’t prejudge meetings’ after strong inflation prints is not helping the dollar.”
Traders pared bets on a Fed rate hike by October to 15% after Warsh’s speech from more than 25% on Oct 15. A Bloomberg gauge of the dollar fell 0.1%, after dropping 0.3% on Oct 15, the biggest decline in more than a month.
Gold rose 0.1% to about US$4,175 an ounce. Treasuries stayed lower on the day as Warsh spoke, after rallying across the curve in US trading.
Traders were looking to Warsh’s speech in Bangkok for more clarity on the path for rates after the fastest US inflation in five months prompted traders to ramp up bets on further Fed tightening. US inflation has remained stubborn, fuelled by elevated oil prices since the Middle East war broke out.
Warsh “doesn’t like forward guidance but in the past has talked about inflation being too high, whichever way the data was cut”, said Kristina Clifton, a senior strategist at Commonwealth Bank of Australia. “He didn’t repeat all that today.”
Stock markets were already rising on Oct 16 before Warsh’s comments as a selloff in chip stocks eased.
In Asia, Samsung Electronics and SK Hynix both advanced more than 4%. That helped South Korea’s Kospi Index rise 4% rebounding from the slump on Oct 15 that sent the gauge to its lowest close since April.
Indonesian stocks slumped as much as 11%, the most since January 1998, after MSCI said the country no longer merits emerging-market status. The rupiah also edged lower.
The durability of the equity rebound may depend on whether gains spread beyond the technology heavyweights that have driven much of the advance in 2026. Broader participation across sectors would help reduce the market’s reliance on AI-linked stocks after this week’s volatility exposed the risks of that concentration.
“It seems like we are seeing a technical rebound, with the overall market settling down somewhat,” said Ryuta Otsuka, a strategist at Toyo Securities.
Volatility could remain relatively high next week as traders monitor earnings “while searching for a bottom,” he said. Bloomberg
Some of the main moves in markets:
Stocks
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S&P 500 futures rose 0.2% as of 2:08 p.m. Tokyo time
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Nikkei 225 futures (OSE) rose 1.5%
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Japan’s Topix rose 1.8%
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Australia’s S&P/ASX 200 rose 1.1%
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Hong Kong’s Hang Seng rose 1%
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The Shanghai Composite rose 0.6%
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Euro Stoxx 50 futures rose 0.8%
Currencies
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The Bloomberg Dollar Spot Index fell 0.1%
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The euro was little changed at $1.1226
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The Japanese yen was little changed at 157.86 per dollar
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The offshore yuan was little changed at 6.6889 per dollar
Cryptocurrencies
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Bitcoin rose 0.3% to $82,231.34
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Ether was little changed at $2,450.87
Bonds
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The yield on 10-year Treasuries advanced three basis points to 5.09%
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Japan’s 10-year yield advanced 4.5 basis points to 2.935%
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Australia’s 10-year yield advanced two basis points to 5.23%
Commodities
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West Texas Intermediate crude fell 0.7% to $97.32 a barrel
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Spot gold was little changed
