Asia stocks climb on Fed cut hopes as Burry targets AI high-fliers; dollar steady, energy in focus
Asian equities advanced as traders bet on a potential Federal Reserve rate cut by December, even as Michael Burry’s $1.1 billion put options against Nvidia and Palantir reignited debate over an AI-fueled bubble. The dollar traded mixed, Bitcoin pushed toward fresh highs, and energy shares firmed after a major ADNOC Gas supply deal.
Tech rebound meets AI bubble warning
Nerves around AI valuations flared after Michael Burry disclosed sizable put options against Nvidia (NVDA) and Palantir (PLTR), citing depreciation and bubble risks. Nvidia shares slumped as much as 14%, underscoring how crowded positioning in AI beneficiaries can amplify downside when sentiment shifts.
Still, risk appetite in Asia held firm as investors looked through single-stock volatility to the broader macro backdrop. Recent U.S. data have reinforced the soft-landing narrative and revived wagers on a December Fed cut, a combination that historically supports duration-sensitive tech and growth names—even as analysts warn tech earnings momentum has lagged the pace of market-cap expansion.
Rates and FX: Fed easing hopes bolster risk, volatility stays subdued
Treasury yields eased alongside growing confidence in Fed easing later this year, helping compress financial conditions. The U.S. dollar was mixed in quiet trade, with FX volatility staying muted as investors await additional data to validate the policy path. Carry trades remained supported by low realized vol, while rate-sensitive pairs such as EUR/USD and GBP/USD found a steadier footing. Sterling was in focus ahead of the UK’s budget, where potential tax hikes could temper growth expectations.
Energy and commodities: ADNOC Gas inks $4B long-term deal; UAE lifts reserves
ADNOC Gas signed a $4 billion, 20-year supply agreement with EMSTEEL, extending its contracted footprint into the 2040s. The UAE also boosted reported oil and gas reserves to 120 billion stock tank barrels and 297 trillion standard cubic feet, underpinned by a planned $150 billion multi-year capital program. For crude and LNG markets, the combination of upstream investment and long-dated offtake could cushion supply anxieties and stabilize forward curves, particularly in Asia’s utility and industrial segments.
Crypto and cross-asset signals
Bitcoin eyed the $87,000 area, riding liquidity inflows that have tracked Big Tech risk-on phases this year. While correlations between crypto and equities ebb and flow, crypto’s ascent has coincided with a softer dollar and easier financial conditions—tailwinds that could persist if Fed cut bets firm.
Macro currents: UK fiscal watch, U.S. housing, talent flows
– The UK budget looms with talk of tax increases, a potential drag on domestic demand that keeps the policy mix under scrutiny.
– In the U.S., the average 30-year fixed mortgage rate hovered near 6.04%. A move below 6% could unleash pent-up refinancing and purchase activity, with knock-on effects for consumption and homebuilders.
– Geopolitical shifts in student mobility—U.S. international intake reportedly down 17%—may gradually reallocate talent toward Europe and Asia, with implications for productivity, innovation clusters, and long-run growth.
Strategists’ lens
HSBC projects the S&P 500 could reach 7,500 by 2026, fueled by AI diffusion and a K-shaped consumer dynamic. That optimistic path leans on resilient margins, capex in automation and cloud, and benign inflation that enables gradual policy normalization. Still, positioning is extended in AI leaders, leaving markets sensitive to earnings disappointments and higher-for-longer rate scares.
Key Points
- Asian stocks rallied on hopes the Fed could cut rates by December; recent U.S. data supported the soft-landing case.
- Michael Burry disclosed about $1.1B in puts against Nvidia and Palantir; Nvidia fell as much as 14% amid renewed AI bubble worries.
- The dollar traded mixed as Treasury yields eased; FX volatility remained subdued with carry trades supported.
- ADNOC Gas signed a $4B, 20-year supply deal; the UAE lifted oil and gas reserves and mapped $150B in capex.
- Bitcoin approached $87,000 as liquidity and risk appetite improved.
- UK budget watch: potential tax hikes keep sterling and gilt markets in focus.
- U.S. 30-year mortgage rates hovered near 6.04%; a sub-6% break could spark buying and refinancing.
- HSBC sees the S&P 500 at 7,500 by 2026 on AI-driven gains and a K-shaped consumer backdrop.
Market outlook
Into week’s end, FX traders will parse incoming U.S. activity and inflation signals to refine December cut odds, while watching whether AI leadership broadens into cyclicals. Energy traders will monitor OPEC+ supply guidance alongside LNG contract news flow, and crypto’s resilience will be tested by any rebound in real yields. With positioning stretched in select megacaps, dispersion and event-driven volatility may remain elevated even as headline indices grind higher.
FAQ
What is driving the Asia equity rally?
Improving odds of a Fed rate cut by December and a softer rates backdrop boosted risk appetite, helping tech and growth shares recover despite idiosyncratic AI stock volatility.
How significant is Michael Burry’s bet against Nvidia and Palantir?
The disclosed $1.1 billion in put options is a sizable hedge that sharpened focus on AI valuation risks. It contributed to a sharp Nvidia selloff and reminded investors that positioning in AI leaders is crowded.
What does the ADNOC Gas deal signal for energy markets?
A $4B, 20-year contract and higher UAE reserves, alongside $150B in capex plans, point to durable Middle East supply investment. That can stabilize LNG and oil supply expectations and temper long-dated price spikes.
How are Fed cut expectations affecting currencies?
Easier U.S. yields have kept the dollar mixed and compressed FX volatility. Rate-sensitive pairs are range-bound as traders await more evidence to confirm the path toward policy easing.
Could sub-6% mortgage rates change the U.S. growth outlook?
Yes. A break below 6% could unlock refinancing and home purchases, supporting consumption and housing-related sectors, though affordability and inventory constraints remain headwinds.
What is HSBC’s outlook for U.S. equities?
HSBC projects the S&P 500 could reach 7,500 by 2026, citing AI-driven productivity, resilient margins, and a K-shaped consumer. The view assumes stable inflation and gradual policy normalization.
What are the main risks to the current rally?
Disappointing tech earnings versus lofty expectations, a resurgence in inflation that delays Fed cuts, tighter fiscal stances (notably in the UK), and a stronger dollar or higher real yields that pressure global risk assets.
This article was produced by BPayNews with an emphasis on FX, global equities, macroeconomics, and commodities.
