SK Hynix' operating profit soared sevenfold year-on-year in the third quarter, triggering a comprehensive rebound in Asian tech stocks. South Korea's composite stock index rose more than 6% in a single day, marking the largest increase in three months. AI Trading confidence also significantly recovered as a result.

Before the U.S. market opens, SK Hynix rose by about 8%, with the company's third-quarter operating profit soaring 7 times year-on-year, offering an epic shareholder return of trillions of Korean won. Seagate Technology fell by about 4%, as the company's quarterly performance guidance fell short of analysts' expectations. NXP fell by about 8%; although the company's Q3 revenue increased by 19% above expectations, the Q4 guidance was lower than anticipated. On the same day, SK Hynix announced a shareholder return plan worth trillions of Korean won, further boosting market sentiment.

This rebound occurred after chip stocks underwent several weeks of adjustment, with investors once again betting on the sustainability of trades related to AI. The NASDAQ 100 index futures rose by 0.5% before the market opened. Alphabet and Microsoft are scheduled to release their financial reports this week, which is expected to further test the foundation of this rebound.

While the market is enthusiastically pricing in AI, it also needs to cope with the pressures brought about by the Federal Reserve's policy direction. The Fed is expected to keep interest rates unchanged at this meeting, but Chairman Powell may face pressure at that time and will need to explain the reasons for the current pause in rate hikes – last month, the Fed unanimously voted to raise rates in order to address inflationary pressures.

Before the U.S. market opened, Seagate Technology fell by about 4% as the company's quarterly earnings guidance fell short of analysts' expectations. NXP fell by about 8%; however, the company's Q3 revenue increased by 19% above expectations, but the Q4 guidance was lower than anticipated. SK Hyundai Electronics rose by about 8%, with the company's third-quarter operating profit soaring by 7 times, offering shareholders an epic return of tens of trillions of won. The European Stoxx 50 index opened up 0.2%, while Germany's DAX index fell 0.2%, the UK FTSE 100 index fell 0.3%, and France's CAC 40 index rose 0.3%. The Nikkei 225 index closed up 1.1% at 6,395.41 points. Japan's TSE index closed down 0.1% at 3,991.71 points. South Korea's Seoul Composite Index rose 6.6% to 6,012.44 points. SK Hyundai Electronics rose nearly 11%, and Samsung Electronics rose by about 9%. The yield on 10-year U.S. Treasury bonds increased by 3 basis points to 5.02%; Japan's 10-year yield also increased by 3 basis points to 2.825%. Spot gold fell 0.7% to $4,029.94 per ounce. Brent crude oil ended a two-day decline, rising 1.8% to around $115.90 per barrel.

AI Market sentiment improves, tech stocks see a boost across the board

Before the U.S. stock market opened, Seagate Technology fell by about 4% due to the company's quarterly earnings guidance falling short of analysts' expectations. NXP's decline was even more significant, reaching around 8% – although the company's third-quarter revenue increased by 19% year-on-year and exceeded expectations, its fourth-quarter guidance fell short of market expectations, disappointing investors.

SK Hynix's strong performance has injected a boost into technology stocks that have been under pressure recently. JonesTrading Institutional Services LLC Chief Market Strategist Michael O ' Rourke wrote in the report, "A wave of AI related news triggered a round of emotional recovery rebound after three weeks of pressure on this sector." These news "made investors believe that large AI companies have the ability and are continuing to push forward with capital expenditures, even though smaller companies are still facing pressure."

Bloomberg market strategist Mark Cranfield stated that investors who bet on a rebound driven by AI and hoped it would overcome the Federal Reserve's decisions will gain confidence as SK Hynix and Samsung Electronics lead the Asian markets higher. "This reminds me of the first half of this year, when the enthusiasm for AI themes seemed to be immune to rising oil prices and higher bond yields."

The rebound in technology stocks this week also benefited from the combined catalysis of news such as Anthropic submitting its S-1 fundraising documents and multiple financing plans.

The Fed's decision is imminent, and there is uncertainty regarding the interest rate path.

While the market is enthusiastically pricing in AI, it also needs to cope with the pressures brought about by the Federal Reserve's policy direction. The Fed is expected to keep interest rates unchanged at this meeting, but Chairman Kevin Warsh may face pressure at that time and will need to explain the reasons for the current pause in rate hikes – last month, the Fed unanimously voted to raise rates in order to address inflationary pressures.

The Fed's forecast released last month indicated that officials support another interest rate hike within the year. Investors priced in the likelihood of a rate hike at this meeting at less than 10% on Tuesday, but they have already identified December's meeting, which will be the last policy meeting of the year, as a possible time window for such a hike.

The yield on the 10-year U.S. Treasury bond benchmark rose by 2 basis points to 5.02%. Damien McColough, the head of fixed-income research at Westpac Banking Corp, stated, "The tone of FOMC will continue to be hawkish, with a vigilant approach to inflation issues. Coupled with the market possibly refocusing on oil price trends, this should create a bearish momentum."

Oil prices stop falling, geopolitical risks rise

In terms of oil prices, Brent crude ended two consecutive days of decline, rising by 1.8% to around $115.90 per barrel. According to a report by The Wall Street Journal citing informed sources, the United States has informed several Gulf countries to prepare for a possible short but intense military conflict with Iran after the mid-term elections.

In the money market, Bloomberg's US Dollar Strength Index rose for the fourth consecutive day, while the New Zealand dollar fell by nearly 2% against the Australian dollar, recording the largest single-day decline since 2017, following the unexpected announcement by the New Zealand Central Bank to maintain its interest rates unchanged. Gold prices dropped by 0.7% to around $4,030 per ounce.