Global financial markets saw a strong rebound at the beginning of this week, with Wall Street stocks closing higher on Monday and Asia-Pacific markets opening with strength on Tuesday. Gold prices held steady following a sharp increase in the previous trading day. This cross-market rally was mainly driven by signals of dovishness from Federal Reserve officials, the rise in technology stocks, and the rekindling of interest in artificial intelligence (AI) themes.
On Monday, the U.S. stock market closed higher, with the S&P 500 rising by 1.55% to 6,705.12 points, the Nasdaq surging by 2.69% to 22,872.01 points, marking its best single-day performance since May 12. The Dow Jones Industrial Average also climbed by 0.44% to 46,448.27 points.
The technology sector led the gains, with the momentum from the “Big Seven” firms in the AI field remaining strong. Market participants increased their bets on a December rate cut to around 85%, a significant surge from 42.4% a week prior.
The rebound on Wall Street started with tech giant Alphabet, whose stock surged by 6.31% on Monday following the upgrade of its AI model Gemini 3. This was a major factor driving the rally in the tech sector.
Corporate earnings reports provided support as well. As of the end of last week, nearly 95% of companies in the S&P 500 index had announced quarterly earnings, with 83% surpassing market expectations.
On Tuesday, Asia-Pacific markets followed suit and rallied alongside the U.S. stocks. The Nikkei 225 index in Japan rose by 1.14% in early trading, the KOSPI index in South Korea increased by 2.39%, the Taiwan Weighted Index climbed by 1.52%, the Hang Seng Index in Hong Kong went up by 1%, and the Hang Seng Tech Index surged by 1.74%.
Semiconductor and AI-related stocks in Asia generally saw gains, including companies like Advantest and Tokyo Electron in Japan, SK Hynix and Samsung Electronics in South Korea, and TSMC and AU Optronics in Taiwan, all showing significant upward trends.
Expectations of a rate cut formed the basis for the broader market rally. According to the FedWatch tool by CME Group, the financial markets saw the likelihood of a December rate cut surpassing 80% (at 80.9% at the time of reporting), significantly higher than 42.4% a week earlier.
Key factors boosting market confidence include dovish statements from Federal Reserve officials.
On Monday, Fed Governor Christopher Waller stated that he advocated for a rate cut in December due to the weakness in the U.S. labor market. Starting in January next year, it will be possible to evaluate the rate direction gradually based on more economic data.
Last Friday, New York Fed President John Williams mentioned that he believed the current monetary policy still has “moderate restrictive characteristics” and there is room for a rate cut in the near term. Williams, formerly seen as a more hawkish Fed official, is now seen as having statements that could easily shift market sentiment.
The prolonged 6-week U.S. government shutdown delayed the release of key data, making the comments from Fed officials one of the few clues for traders to predict the next move.
The rate cut expectations not only boosted the stock market but also lifted the precious metals market. Gold held steady after a nearly 2% surge in the previous trading day, currently trading at around $4,135 per ounce. With lower rates benefiting non-yielding gold, the metal has risen by nearly 60% this year, on track for its best annual performance since 1979.
Despite the strong close on Wall Street on Monday, the S&P 500 index and the Nasdaq index could still see monthly losses.
This week will continue to see the release of various economic data, including retail sales, producer price index, new durable goods orders, and the Case-Shiller Home Price Index, among others.
The U.S. holiday shopping season is also set to kick off this week. The market will assess whether there are signs of weakness in domestic consumption, which accounts for around 70% of the U.S. economy.
The National Retail Federation (NRF) expects holiday sales to exceed $1 trillion for the first time this year.