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AI rally in Asia faces test from Alphabet and Microsoft

Asian tech shares rose today, led by South Korea. The Kospi, viewed as a barometer of AI flows, jumped by 6.6%, posting its strongest gain in three months. SK Hynix

AI rally in Asia faces test from Alphabet and Microsoft
07:44 2026-10-28 UTC+00
Exchange Rates analysis

Asian tech shares rose today, led by South Korea. The Kospi, viewed as a barometer of AI flows, jumped by 6.6%, posting its strongest gain in three months. SK Hynix surged by 11%, and Samsung Electronics gained roughly 9%, helping the broader MSCI Asia-Pacific index climb by 1.3%. Nasdaq 100 futures added 0.5%, while European contracts pointed to a small open loss.

What triggered the move was a strong report from SK Hynix and an announcement of roughly $45 billion in shareholder returns. That brought investors back into the AI segment, which had been under pressure for three weeks, and showed that big players are still deploying capital even as smaller names struggle. The sector also received a boost this week from Anthropic's S-1 filing and a string of other capital-raising plans.

The market now faces several near-term tests. The Fed decision is scheduled for today, Alphabet and Microsoft are set to report within days, and later this week, the ECB and the BOJ will hold their policy meetings. The market expects the Fed to hold interest rates steady, despite stronger-than-expected September inflation. Traders price in a sub-10% chance of a rate hike this week but already peg a December increase as likely. Recall that committee members voted unanimously for the last rate increase, and many still expect another hike this year, so Chair Kevin Warsh will need to explain why the Fed is holding. The 10-year Treasury yield ticked up by 2 bps to 5.02%.

Geopolitics remains front and center. The Wall Street Journal reported that the US warned several Gulf states of a possible short, intense campaign after the midterms, a development that was immediately felt in commodity markets.

Brent halted a two-day slide and rose by 1.8% to $115.90/bbl. That's bullish for exporters but a further argument for tighter policy for consumers and central banks, because costly energy fuels inflation. Gold fell by 0.7% to settle around $4,030/oz.

Today's Asian rally looks more like a reaction to earnings than a vote of long-term confidence. If Warsh maintains a hawkish tone and reaffirms odds of a December hike, particularly with oil above $115, the AI rally will likely give back part of today's gains. Conversely, if the Fed avoids putting renewed pressure on the bond market and Alphabet and Microsoft deliver strong results, that could cement the bounce and keep Kospi leadership intact.

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As for S&P 500 technicals, the immediate task for buyers today is to overcome the resistance level of $7,737. That would show upside momentum and open a path to $7,756. Gaining control of $7,774 would further strengthen bulls' positions. On a downside move amid falling risk appetite, buyers should defend near $7,718. A break below that level would likely push the index to $7,698 and open the way to $7,679.

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