Meta Muse Revives Asian Tech Rally as Dollar Firms on Fed Bets
Asian equities rose on Meta's AI success, while the dollar hit a seven-week high amid rising US rate-hike odds.
Key points
- Asian tech stocks rallied on strong demand for Meta's Muse AI, with the MSCI Asia-Pacific index rising 0.75%.
- The US dollar index hit 100.4 as CME FedWatch data showed a 56% probability of an October rate hike.
- Brent crude steadied at $100.65 per barrel, supporting equity sentiment after a recent 3% drop in prices.
Asian technology shares led a regional market rally on Tuesday, reversing a week of AI-sector weakness. The rebound was driven by strong initial adoption of Meta Platforms' Muse AI assistant, which restored investor confidence in the sector after recent safety concerns from major tech firms triggered a global selloff.
The MSCI Asia-Pacific index excluding Japan reached a two-week high, closing up 0.75%. Tech-heavy South Korean stocks jumped 2% before trimming gains, while Taiwan shares set a record high. According to Zawya, the move was supported by a combination of renewed AI enthusiasm, falling crude oil prices, and declining US Treasury yields.
Brent crude stabilizes near key level
Energy costs provided a supportive backdrop for equity markets. Brent crude futures held steady at $100.65 per barrel after a 3% drop in the previous session, during which prices briefly breached the key $100 threshold. Analysts noted that the decline in oil prices was a primary driver for the risk-on sentiment, reducing inflationary pressures and allowing investors to rotate back into growth assets.
Dollar strength persists on tightening expectations
Currency markets reflected a hawkish shift in global monetary policy. The US dollar index climbed to 100.4, approaching a seven-week high, as traders increased their bets on further Federal Reserve rate hikes. CME FedWatch data showed the probability of an October rate increase rising to 56%, up from 43.5% the previous week, reinforcing the dollar's strength against other major currencies.
The yen came under pressure, trading at 157.47 per dollar near a three-week low. Although the Bank of Japan raised rates to a 31-year high last week, two dissenting votes and a lack of explicit forward guidance disappointed investors. This uncertainty left the yen vulnerable to selling, despite potential intervention risks cited by market strategists.
Geopolitical talks influence market sentiment
Investors are closely monitoring diplomatic developments that could impact trade and technology sectors. Chinese President Xi Jinping is expected to visit Washington later this week for the first time in over a decade. Markets are watching for signals that a trade truce will be extended and that cooperation on artificial intelligence may deepen, factors that could sustain the current equity momentum.
