The AI trade is roaring back on Wednesday as export demand surges across Asia, lifting chipmaker stocks and pushing the regional benchmark to its highest in a week.
MSCI's broadest index of Asia-Pacific shares outside Japan .MISX00000PUS rose 1.3% to extend gains into a second day as the KOSPI .KS11 surged as much as 6.2% and Japan's Nikkei 225 .N225 climbed 1.9%.
European market open and key events
In early European trades, pan-region futures STXEc1 were up 0.1%, while German DAX futures FDXc1 and FTSE futures FFIc1 nudged 0.3% higher.
Key developments that could influence markets on Wednesday:
U.S. earnings: Alphabet, Tesla, Philip Morris International, Texas Instruments, IBM
European earnings: Banco Santander, Iberdrola, Experian, Deutsche Boerse, Equinor, UniCredit
Economic events: UK CPI, PPI, RPI for June
Oil, the yen and Japan's trade data
All of which could make for a bumpy ride as we head towards the end of the week. Fighting in the Middle East remains front and centre, pushing oil prices higher once again and giving policymakers yet more problems to wrestle with.
Brent crude LCOc1 was up 1.2% at $92.13 after two oil tankers carrying Saudi crude to Asia reversed course in the Red Sea on Tuesday following threats from Yemen's Iran-aligned Houthis. Closure of the Bab el-Mandeb waterway could increase shipping disruptions around the widening Middle East conflict.
Against the yen JPY=, the U.S. dollar was flat at 163.105 yen, after Japanese Finance Minister Satsuki Katayama said on Wednesday that the government remains ready to take "decisive action" in currency markets if needed, while refraining from commenting on specific foreign-exchange levels. The Japanese currency hit its weakest level since 1986 on Tuesday.
Making life even harder for policymakers in Tokyo, the combination of a battered yen and soaring oil prices pushed Japan's imports to a record high in June. Exports also topped expectations, helped by booming demand from AI-related data centres - and a weak currency that continues to boost overseas sales.
Big Tech earnings and AI model concerns
The rally in tech hardware names makes for curious timing. It comes just after OpenAI disclosed that an autonomous agent powered by its advanced AI models went off-script during a security test, triggering a hack that compromised AI startup Hugging Face's infrastructure.
And that's hardly the only reason to feel anxious about Big Tech.
S&P 500 e-mini futures slipped 0.1% in Asian trading ahead of results from Alphabet GOOGL.O and Tesla TSLA.O. Investors are keeping a close eye on Alphabet as questions mount over delays to a flagship AI model, while Tesla is expected to post its first quarterly cash burn in more than two years.
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