Marketmind: Risk rally rages on

A look at the day ahead in European and global markets from Ankur Banerjee

Buoyed by a tech-fuelled rally on Wall Street, risk assets in Asia charged higher on rising expectations the Federal Reserve is done hiking rates and will likely cut early next year.

The worry remains that upcoming data might show not just a slowing U.S. economy but also an economy on the verge of a recession. But for now investors are looking the other way.

MSCI’s broadest index of Asia-Pacific shares outside Japan touched a fresh two-month peak and is on track for its best monthly performance since January.

Lower Treasury yields have led the dollar broadly lower against most currencies, with a strong fix on China’s yuan piling more pressure on the greenback. {{2126|The dodollar index, which measures the U.S. currency against six of its peers, fell to its lowest since Aug. 31.

Japan’s Nikkei remained close to the 33-year high it touched on Monday. A Reuters poll showed analysts expect the index to continue its more-than-28% rally this year into 2024 to reach a three-decade high of 35,000 by end-June.

With the economic calendar bare in Europe, the rally may fizzle out although futures indicate European stock markets are set for a slightly higher open. Investors will turn their focus to minutes of the Federal Reserve’s last meeting later in the day for cues on where rates are headed.

The spotlight will shine bright on earnings from artificial intelligence chip leader Nvidia, with expectation of another blockbuster revenue forecast.

Investors have cheered a better-than-expected U.S. earnings season and the results will be a major test for the AI-powered rally that has helped drive up the U.S. stock market this year.

Speaking of AI, the drama surrounding the future of OpenAI shows no sign of stopping. OpenAI named ex-Twitch boss Emmett Shear as interim CEO, while outgoing chief Sam Altman moved to backer Microsoft (NASDAQ:MSFT), in a surprise turn of events that clouded the future of the startup at the heart of the artificial intelligence boom.

Meanwhile, the chief of Hamas told Reuters on Tuesday that the Palestinian militant group was near a truce agreement with Israel, even as the deadly assault on Gaza continued and rockets were being fired into Israel.

Key developments that could influence markets on Tuesday:

Fed minutes, Oct inflation data for Canada, Nvidia earnings