Asian equities and U.S. stock futures steadied on Monday, clawing back a slice of the previous week's steep losses as investors weighed whether the selloff in artificial-intelligence names had run its course and positioned for a likely Federal Reserve rate increase next month.
MSCI's broadest gauge of Asia-Pacific shares outside Japan climbed 0.8%, following a 4.6% slide last week. Japan's Nikkei added 2.5%, Korean shares posted modest gains, and Taiwan's benchmark advanced roughly 2.5% after suffering its worst weekly decline in 20 years. S&P 500 e-minis edged slightly higher, while Nasdaq 100 futures slipped 0.2% to 27,033.75 and Dow futures rose 0.4% to 51,605.0.
The recovery follows a bruising stretch in which the AI trade buckled under rising borrowing costs, then came under fresh pressure after Democratic victories in the U.S. midterm elections raised the prospect of tighter oversight of AI development and data-center construction. Thursday's session brought some of the year's sharpest declines, with the Nasdaq dropping 5.5%, the S&P 500 falling 4.4% and the Dow losing 3.4%. Wall Street rebounded on Friday, with the Nasdaq up 1.1% and the S&P 500 ahead 0.3%, though all three major indexes finished the week lower.
"The markets are far from being out of the woods yet," said Kyle Rodda, senior financial market analyst at Capital.com. He pointed to last week's elections, which have "led to increased regulatory risk," and an earnings season in which the largest technology companies have fallen short of expectations. "The momentum remains skewed to the downside," Rodda said.
Attention this week turns to results from companies at the center of the AI build-out. CoreWeave (CRWV), a cloud provider focused on AI infrastructure, reports Tuesday, while chip-equipment maker Applied Materials (AMAT) and networking group Cisco Systems (CSCO) are due Thursday. Their figures will be read as a test of whether the enormous capital spending behind AI is translating into profit.
Nvidia (NVDA) is also back in the spotlight after its board said on Sunday it had opened an independent investigation into reports that Chief Executive Jensen Huang was the target of a foreign intelligence operation. Huang has apologized to employees after acknowledging an affair with businesswoman Alice Huang, whom U.S. intelligence suspects of being a Chinese spy.
Rate expectations harden
A stronger-than-expected U.S. employment report on Friday showed employers added 165,000 jobs last month, more than double the consensus forecast, reinforcing the case for a December rate increase. Futures markets now assign nearly an 80% probability to a hike of at least 25 basis points at the Fed's Dec. 8-9 meeting, according to the CME FedWatch Tool. The central bank lifted rates in September for the first time in three years.
New York Fed President John Williams said U.S. growth has proven remarkably resilient through a series of shocks, but that inflation remains too high and returning it to 2% is essential. Tuesday's consumer price index reading and Friday's producer price data will be scoured for confirmation of the policy path.
The dollar posted its largest one-day advance in five months, and the dollar index last stood at 102.2. The euro was little changed at $1.1148, while the yen strengthened 0.2% to 158.215.
Note: Moves are as of the latest trading levels cited in the reports.
Oil retreated, with Brent crude at $97.49 a barrel, after President Donald Trump said Sunday that he was highly unlikely to order new strikes on Iran so long as talks aimed at ending the conflict make progress.
Digital assets extended losses, with bitcoin down more than 2% at $73,708 and ether off about 5% at $2,223, its weakest level in more than two months, as traders anticipated tougher cryptocurrency rules from a Democratic-controlled Congress.
For investors, the coming days present a dual test: whether AI-linked earnings can justify the sector's valuations after the recent shakeout, and whether a hot inflation print would lock in another Fed increase. Both outcomes carry the potential to extend the volatility that has defined trading since the midterms.
