Asian markets track Wall St bounce as Fed decision looms

Michael M. Santiago/Getty Images/AFP

Published on:

29 Jan 2025, 04:11

Asian markets rose in holiday-thinned trade Wednesday, following a rally on Wall Street. Tech stocks, led by Nvidia, rebounded from heavy losses the day before, as concerns over Chinese AI startup DeepSeek eased.

Investors were also awaiting the conclusion of the Federal Reserve’s policy meeting later in the day, as well as earnings reports from major companies like Microsoft and Tesla in the coming days.

A sense of calm returned to trading floors after Monday’s sell-off, sparked by DeepSeek’s unveiling of its R1 chatbot, which was reported to match the capabilities of US AI leaders for a fraction of the investment made by American firms.

The news had caused significant losses in tech stocks on Monday, with US chip giant Nvidia tumbling nearly 17 percent, wiping out almost $600 billion in market value — the largest single-day loss for a publicly traded company.

Nvidia, which has seen a massive surge of about 1,900 percent over the past five years, is at the forefront of the AI boom. However, Tuesday saw a rebound, with Nvidia rising 8.8 percent. Analysts suggested the earlier sell-off was overdone, with some pointing out skepticism about the cost claims of DeepSeek’s AI.

Despite concerns about the scale of AI investments, industry experts believe the startup’s entry could help drive further AI development. Steve Cohen, founder of Point72 Asset Management, noted that DeepSeek’s arrival could boost AI progress. Malik Ahmed Khan at Morningstar added that US companies might eventually replicate some of DeepSeek's techniques to lower their own AI costs.

All three major US indexes gained on Tuesday, with the Nasdaq rising 2 percent and the S&P 500 up nearly 1 percent, recovering much of their earlier losses.

Asian markets also followed suit, with Tokyo’s Nikkei 225 climbing 0.6 percent after recent declines due to weak performance from its chip companies. There were also gains in Sydney and Wellington, though most of Asia’s markets were closed for the Lunar New Year holiday.

The Federal Reserve’s policy meeting is expected to leave interest rates unchanged, but investors will closely scrutinize the post-meeting statement and comments from Fed Chairman Jerome Powell for hints on future monetary policy. US President Donald Trump has called for rate cuts, though concerns about his economic agenda — including tax cuts, deregulation, and tariffs — could fuel inflation.

The US dollar strengthened as traders anticipated prolonged high borrowing costs. The dollar received an additional boost after Trump called for higher universal tariffs.

Market watchers are also awaiting the European Central Bank’s upcoming policy meeting, with some analysts predicting a small rate cut.

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