The Japan Times - Stocks torn between AI optimism, Fed rate warning

Wall Street's main indices rose at the opening bell after finishing the previous day lower, but wobbled in morning trading.

Investors have enjoyed a months-long rally for equities that has pushed some markets to record highs, but the run-up took a pause Tuesday amid talk that the gains may have gone too far.

But Trade Nation analyst David Morrison characterised Tuesday's selloff as shallow.

"The general feeling is... that any pullback is a buying opportunity," he said.

A key driver of the rally has been expectations that the Fed will continue to cut US interest rates before the end of the year.

However, Powell cooled expectations with a warning Tuesday that cutting rates too aggressively risked stoking inflation, while also noting that stocks are "fairly highly valued".

Investors are awaiting the release on Friday of the personal consumption expenditure (PCE) index, the Fed's favoured gauge of US inflation, and key American jobs figures next week.

Briefing.com analyst Patrick O'Hare noted Powell's comments that stock valuations are high were not revelatory given that analysts had been talking about the situation for some time.

"Yes, stocks are 'fairly highly valued', yet the tale of the tape is that the market thinks 'maybe not' given the AI boom, the pivot to lower policy rates, and stimulative tax policies," he said.

"Its hopeful view remains supported by the absence of a disillusioning fundamental catalyst," he added.

Alibaba CEO Eddie Wu's unveiling of plans to ramp up AI spending by about $53 billion provided a positive catalyst for tech stocks as well as the Hong Kong and Shanghai stock markets.

Alibaba shares surged more than nine percent.

"The industry's development speed far exceeded what we expected, and the industry's demand for AI infrastructure also far exceeded our anticipation," Wu told an audience at the firm's annual developer conference in Hangzhou, China.

Trade Nation's Morrison pointed out that US chipmaker Micron Technology issued positive forward guidance along with strong sales and earnings figures.

"The news helped dispel fears over excessive AI spending, and that has fed through to a recovery in the US majors this morning," he said.

Some early gains for US tech giants evaporated in morning trading.

Europe's main stock markets finished the day mixed.

Crude prices firmed Wednesday "after (US President) Donald Trump ramped up further pressure on sanctions on Russian oil", noted Kathleen Brooks, research director at XTB.

Following calls to do so by Trump, the European Commission also indicated it would propose tariffs on imports of Russian oil, which Hungary and Slovakia continue to buy.

The Argentine peso rose sharply on Wednesday after Washington said it is in talks with Argentina for a swap line allowing the country access to billions of dollars.

Meanwhile Powell's comments continued to lend support to the dollar, which had come under pressure from rate-cut expectations.

- Key figures at around 1530 GMT -

New York - Dow: DOWN less than 0.1 percent at 46,255.64 points

New York - S&P 500: DOWN less than 0.1 percent at 6,652.62

New York - Nasdaq Composite: DOWN less than 0.1 percent at 22,562.71

London - FTSE 100: UP 0.3 percent at 9,250.43 (close)

Paris - CAC 40: DOWN 0.6 percent at 7,827.45 (close)

Frankfurt - DAX: UP 0.2 percent at 23,666.81 (close)

Tokyo - Nikkei 225: UP 0.3 percent at 45,630.31 (close)

Hong Kong - Hang Seng Index: UP 1.4 percent at 26,518.65 (close)

Shanghai - Composite: UP 0.8 percent at 3,853.64 (close)

Euro/dollar: DOWN at $1.1740 from $1.1816 on Tuesday

Pound/dollar: DOWN at $1.3451 from $1.3524

Dollar/yen: UP at 148.75 yen from 147.66 yen

Euro/pound: DOWN at 87.28 pence from 87.37 pence

Brent North Sea Crude: UP 1.7 percent at $68.08 per barrel

West Texas Intermediate: UP 2.1 percent at $64.72 per barrel

burs-rl/sbk

T.Shimizu--JT