Asian stocks rise as expectations grow for another Fed rate cut

Asian markets advanced on Tuesday after a series of dovish remarks from US Federal Reserve officials boosted hopes of another interest rate cut next month. The upbeat sentiment was further supported by a tech-driven rally on Wall Street, easing recent concerns over an AI market bubble.

Following weeks of volatility, confidence returned to global trading floors as investors increasingly expect the Fed to deliver a third consecutive rate cut. A cooling US labour market is reinforcing the case for easing, despite inflation remaining higher than desired.

Fed governor Christopher Waller told Fox Business that the labour market—not inflation—is now his main concern under the central bank’s dual mandate, adding: “I’m advocating for a rate cut at the next meeting.” His views were echoed by San Francisco Fed president Mary Daly, who told the Wall Street Journal she felt less certain the Fed could stay ahead of labour-market weakness. She also noted that President Trump’s tariffs had caused less inflationary pressure than feared.

New York Fed chief John Williams said Friday there was still “room for a further adjustment” at the December 9–10 policy meeting. Analysts highlighted the lack of pushback from Fed Chair Jerome Powell, interpreting it as tacit support for another reduction.

Market odds for a rate cut have surged to around 90 percent, up from about 35 percent a week ago.

The prospect of cheaper borrowing sent Wall Street higher for a second straight session Monday, with the S&P 500 up 1.6 percent and the Nasdaq jumping 2.7 percent as tech giants Alphabet, Meta, and Amazon rallied.

Asian markets followed suit, with Hong Kong, Shanghai, Seoul, Taipei, Manila, and Jakarta all gaining. However, Sydney, Singapore, and Wellington saw mild pullbacks.

Tech stocks, which recently faced selling pressure over fears that AI-driven valuations had overheated, enjoyed renewed momentum. Analysts say the sector is entering a more selective phase, rewarding companies with strong fundamentals over hype.

“AI is still one of the most powerful forces reshaping markets, but the tone is changing,” wrote Saxo Markets strategist Charu Chanana, noting that strong chipmaker earnings confirm solid demand but volatility shows investors are becoming more cautious.

Investor sentiment also improved after President Donald Trump praised “extremely strong” US-China relations following a call with Chinese President Xi Jinping. Trump said he plans to visit China in April, while Xi is expected to travel to Washington in 2026. China’s foreign ministry added that Trump acknowledged the sensitivity of the Taiwan issue, though he did not mention it publicly.