Asian shares rise on AI enthusiasm, New Zealand dollar slips after RBNZ’s surprise decision

Asian shares rose on Wednesday as interest in artificial intelligence picked up again ahead of earnings from major US technology companies. The New Zealand dollar weakened after the country’s central bank unexpectedly left interest rates unchanged.

Kospi jumps after SK Hynix report

South Korea’s Kospi index rose more than 6%, heading for its biggest one-day gain since July 31. The move came after chipmaker SK Hynix said its quarterly profit had risen more than sevenfold. The company also said it would return roughly $75 billion to shareholders this year.

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 1.7%. Japan’s Nikkei index rose 1.1% and China’s CSI300 index added 0.7%. Nasdaq futures rose 0.35% and S&P 500 futures gained 0.05%. EUROSTOXX 50 and DAX futures fell more than 0.2%.

Alphabet and Microsoft earnings in focus

The AI rally faces its next test. Alphabet and Microsoft will report earnings after the market close. Investors are looking for evidence of returns showing that the heavy spending on AI infrastructure is paying off.

A series of AI-related financing announcements from Meta, SpaceX and Broadcom revived interest in the sector this week. Anthropic’s filing for an initial public offering (IPO) also supported the market.

Nick Ferres, chief investment officer at Vantage Point Asset Management, said the equity market views this as a growth opportunity, while credit markets have begun to price in funding risk. In his words, the capital expenditure boom is continuing and the demand side still looks fairly strong, but there is a question mark over investment returns. Funding markets, he added, may be becoming tougher for companies with weaker balance sheets.

Chris Brigati, chief investment officer at SWBC, believes not all big tech stocks can be treated the same in terms of future upside potential. He noted that the rising-tide phase that lifted all stocks has begun to change, and the focus is now on execution risk and how much of future success is already reflected in current prices.

Bank of Canada and Fed decisions awaited

Investors are also awaiting the interest rate decisions of the Bank of Canada and the US Federal Reserve on Wednesday. The Bank of Canada is expected to raise rates, while the Fed is expected to hold them steady.

JPMorgan analysts said in a client note that they expect at least two hawkish dissents within the Fed. In their view, market participants will pay close attention to how Chair Kevin Warsh presents the decision.

RBNZ surprises the market

The Reserve Bank of New Zealand (RBNZ) held its official cash rate at 2.75% in a narrow vote. The market had been confident of a rate hike. Following the decision, the New Zealand dollar fell more than 1% to $0.5583, its lowest level of the session.

Carol Kong, currency strategist at Commonwealth Bank of Australia, said the decision does not mean the entire rate outlook was wrong. According to her, the RBNZ showed it is willing to surprise markets, which is a reminder that central banks do not take orders from markets.

Other currencies, oil and gold

The Australian dollar held steady at $0.7031. Data showing that domestic inflation accelerated in the third quarter amid higher fuel prices supported it. The Israeli shekel weakened after elections held during wartime. Exit-poll results point to a deadlock.

Oil prices rose after an attack on an oil refinery in Saudi Arabia, which renewed concerns about supply risks in the Middle East. Brent crude futures gained 1.4% to $115.47 a barrel, while US crude futures rose 1.5% to $101.40. Spot gold fell 0.4% to $4,040.32 an ounce.