Market Overview
Investors entering the European session are navigating a landscape shaped by diverging central bank signals from the Asia-Pacific region, sustained optimism in artificial intelligence (AI) technology stocks, and persistent global inflationary pressures. This backdrop sets the stage for crucial announcements later today, including the US Federal Reserve’s policy decision and earnings reports from major tech companies.
Australia’s sharemarket closed marginally lower after hotter-than-expected domestic inflation data significantly raised the probability of a Reserve Bank of Australia (RBA) rate hike next week. This contrasted sharply with the Reserve Bank of New Zealand’s (RBNZ) unexpected decision to hold rates steady. Across Asia, technology shares led a broad rally, bolstered by strong earnings from South Korean chipmakers and continued enthusiasm for AI infrastructure. Rising energy costs continue to fuel global inflation concerns.
Markets
Australia’s S&P/ASX 200 (^AXJO) reversed early gains to close marginally lower at 8,847.30, shedding 0.03% on 28-OCT-26, following the release of domestic inflation data. In Asia, South Korea’s KOSPI (^KS11) surged 6.87% to 6,025.48 as of approximately 2:30 pm Seoul time, driven by strong chipmaker earnings. Japan’s Nikkei 225 (^N225) advanced 1.35% to 64,121.80 as of approximately 2:35 pm Tokyo time. Hong Kong’s Hang Seng Index (^HSI) gained 0.06% to 23,054.11, the Shanghai Composite (000001.SS) rose 0.58% to 3,669.50, and Singapore’s Straits Times Index (^STI) edged up 0.01% to 5,397.50, all as of approximately 1:35 pm local time. European markets are in pre-market.
The US Dollar Index (DX-Y.NYB) traded higher, up 0.10% to 102.43, ahead of the Federal Reserve’s policy decision. The Australian Dollar (AUD/USD) rose 0.23% to 0.7035 following the inflation data. Meanwhile, the New Zealand dollar experienced a sell-off after the RBNZ’s rate hold, though the NZX 50 (^NZ50) edged 0.2% higher, according to Investing.com.
In the US Treasury market, the 10-year yield (^TNX) increased by 0.70 basis points to 4.993% on 27-OCT-26. Brent Crude (BZ=F) closed lower at 111.14, down 2.41%, while WTI Crude (CL=F) closed at 101.50, up 1.60% on 28-OCT-26.
What Drove Markets
The key drivers for markets included diverging central bank policies, a continued rally in AI-linked technology stocks, and anticipation surrounding US monetary policy and Big Tech earnings.
Central Bank Divergence and Inflationary Pressures
Australia’s sharemarket reacted to hotter-than-expected core inflation data for the September quarter, which picked up to 1% quarterly and 3.7% on an annual basis. This led bond traders to price an 87% chance of a fifth Reserve Bank of Australia (RBA) cash rate increase to 4.85% next week. This sentiment contrasted with the Reserve Bank of New Zealand’s (RBNZ) unexpected decision to keep its cash rate on hold today, which caused the New Zealand dollar to sell off. Westpac Banking Corporation (WBC.AX) and Commonwealth Bank of Australia (CBA.AX) are among those expecting the RBA to lift rates next week. Compounding these monetary policy considerations, Brent crude was noted above $115 a barrel by Investing.com, adding to concerns that energy costs could sustain inflationary pressure.
AI-Driven Tech Rally Continues
Optimism surrounding artificial intelligence infrastructure continues to buoy technology and chip stocks globally. South Korean chip giant SK Hynix reported a seven-fold increase in quarterly profit, topping analyst expectations with a 631% jump in Q3 operating profit and an additional 60 trillion won in shareholder returns. This sparked a rally across Asian tech shares, with SK Hynix’s shares surging nearly 9% and Samsung Electronics Co., Ltd. (005930.KS) advancing more than 8%, according to Investing.com. Japanese chipmakers Kioxia Holdings and Taiyo Yuden also saw significant gains, with shares surging over 12% and more than 8% respectively, Investing.com reported.
This followed a positive session on Wall Street, where chip stocks like Broadcom Inc. (AVGO), up 4.00% to 342.33, Advanced Micro Devices, Inc. (AMD), up 5.45% to 560.26, and Micron Technology, Inc. (MU), up 2.77% to 928.76, saw significant gains on 27-OCT-26. Broadcom’s rise came after it announced a $63 billion financing deal for its chips and networking solutions for AI, to be leased to Anthropic. Morgan Stanley’s chief U.S. equity strategist, Mike Wilson, believes “Most of the correction is already over” for tech stocks. Australian miners, particularly those producing copper and other industrial metals, also benefited as local access points to the AI infrastructure buildout, as Global X investment strategist Justin Lin noted. Perseus Mining rallied 8.7 per cent to $5.89 and lithium producer PLS rallied 3.8 per cent to $2.99, according to AFR. Major Australian miners BHP Group Limited (BHP.AX) and Rio Tinto Group (RIO.AX) also closed higher on 28-OCT-26, up 0.09% and 0.17% respectively.
Upcoming US Monetary Policy and Big Tech Earnings
A primary focus for global investors is the upcoming US Federal Reserve policy decision. The central bank is widely expected to hold interest rates steady at a target range of 3.75% to 4%, with CME’s FedWatch tool indicating a roughly 92% chance. However, market participants will scrutinize Chairman Kevin Warsh’s commentary for any signals regarding future rate hikes. Later in the US session, earnings reports from tech giants Alphabet Inc. (GOOGL), which closed up 1.19% to 320.58, and Microsoft Corporation (MSFT), which closed down 0.24% to 531.33 on 27-OCT-26, will provide key insights into the translation of heavy AI infrastructure spending into revenue growth, influencing broader market sentiment. News that Iran’s Supreme Leader Mojtaba Khamenei met with a top security official to discuss conditions for ending the war with the U.S. also contributed to lower oil prices in the previous US session, supporting stocks.
Stocks to Watch
- Chipmakers & AI Infrastructure: South Korean memory chip suppliers like SK Hynix and Samsung Electronics, along with Japanese counterparts Kioxia Holdings and Taiyo Yuden, are poised to continue benefiting from strong demand in the semiconductor sector driven by AI. Broadcom’s $63 billion AI-chip financing deal and strong earnings from South Korean semiconductor companies have reinforced investor interest in AI infrastructure. The focus now shifts to whether upcoming Big Tech earnings justify continued investment.
- Australian Miners: Companies like BHP Group (BHP.AX), Rio Tinto Group (RIO.AX), Perseus Mining, and PLS are drawing attention as “local access points” for Australian investors to the AI infrastructure buildout, particularly those producing copper and other industrial metals. UBS upgraded Sandfire Resources to ‘buy’.
- Big Tech: Alphabet (GOOGL) and Microsoft (MSFT) earnings will be closely watched for cues on AI’s impact on revenue.
- Australian Banks: Westpac Banking Corporation (WBC.AX) and Commonwealth Bank of Australia (CBA.AX) are in focus ahead of the RBA’s decision next week.