Emerging Markets on the Rise: Interest Rate Odds Are Increasing

Asian stock markets mostly rose on Monday amid prospects of falling U.S. interest rates. Following volatility from concerns over last week's tech bubble, this new positive development provided investors with a breather.

Major investments in the field of artificial intelligence have lifted stocks this year, with chip manufacturer Nvidia achieving a significant milestone, surpassing $5 trillion in market capitalization last month. However, investors are concerned that the massive investments in the sector may be excessive and that achieving profitability could take time. This has led to warnings about a potential market correction.

Additionally, the recent decrease in expectations for the Federal Reserve to cut interest rates for the third time next month has added to uncertainty. However, comments from New York Fed President John Williams, who indicated in a recent statement that there is 'room for more adjustments' at the December meeting, boosted risk appetite and raised expectations for interest rate cuts from 35% to 70%.

This week, the producer price index is expected to be released. This will be one of the last major data points officials will consider before their meeting. IG market analyst Fabien Yip noted, 'This reading has become significant due to the postponement of next month’s personal consumption expenditures report. A PPI reading that is much stronger than expected could raise concerns about ongoing inflationary pressures.'

The rise seen on Wall Street on Friday led to a positive start for most Asian markets this week. Hong Kong and Seoul saw increases of over 1%, while Sydney, Singapore, Wellington, and Taipei also recorded gains. On the other hand, Shanghai and Manila retreated. U.S. futures also rose.

Tokyo was closed due to a holiday.

However, although the overall atmosphere is less tense compared to last week, uncertainty continues to put pressure on risk assets. Bitcoin is fluctuating around $87,000. While this is up from its seven-month low of $80,553, it is still well below last month’s record of $126,200.

Key figures (in GMT) are as follows:

• Hong Kong - Hang Seng Index: Up 1.4% at 25,568.08
• Shanghai - Composite: Down 0.1% at 3,829.71
• Tokyo - Nikkei 225: Closed due to holiday
• Dollar/Yen: Above at 156.70 yen compared to Friday
• Euro/Dollar: $1.1515, down from the previous $1.1519
• Pound/Dollar: $1.3096, down from the previous $1.3107
• Euro/Pound: 87.92 pence, up from the previous 87.88 pence
• West Texas Intermediate: Down 0.2% at $57.93 per barrel
• Brent North Sea Crude Oil: Down 0.2% at $62.44 per barrel
• New York - Dow: Up 1.1% at 46,245.41 (closing)
• London - FTSE 100: Up 0.1% at 9,539.71 (closing)