Asia Open: Relief Rally Gives AI Another Day in Court

Oil remains the joker in that deck.

Takeaways

• US stocks recovered on Monday as AI sentiment stabilised, oil eased and credit markets stopped leaking, but the rebound looked more like relief than renewed conviction.

• Anthropic, Meta and SpaceX all reminded investors that the AI buildout still has access to capital, although the sheer size of the fundraising also raises the uncomfortable question of how hungry the machine is becoming.

• The Fed is unlikely to hike this week, but December remains very much alive, leaving Kevin Warsh’s messaging as important as the decision itself.

• Asia inherits a friendlier handoff, but hyperscaler earnings, the Fed and still-elevated Middle East risk mean the market has earned a breather, not an all-clear.

Relief Rally? or Buy the Dip?

Asian stocks are set to open firmer after US markets bounced on Monday, with the Nasdaq 100 rising 1.1%, the S&P 500 gaining 0.7% and semiconductors posting their strongest session in more than a month. The immediate catalyst was a revival in AI enthusiasm after Anthropic filed for a US IPO, while Meta’s equity raise and SpaceX’s new AI-chip financing package reassured investors that capital is still available for the next leg of the buildout. Oil also backed away from recent highs, taking a little heat out of the inflation trade and giving risk assets some breathing room.

I would still file Monday under relief rally, not resurrection.

We have a folder for these things.

After last week’s great below-the-surface tech reset, the market came into Monday with plenty of bruises and not much appetite for another fight. AI fears had stabilised, the Middle East made it through the weekend without another major escalation, oil softened and credit markets stopped bleeding. That was enough to pull buyers back into US stocks and revive some of the names that had been dragged behind the woodshed only a few sessions earlier.

But a market bouncing because nothing got materially worse is not the same thing as a market rallying because everything suddenly got better. Monday felt less like a fresh charge up the hill and more like traders checking whether the stretcher was still needed.

The distinction matters.

Anthropic’s S-1 filing helped rekindle the AI mood, Meta came back to the capital markets with a massive equity raise and SpaceX secured a large Apollo-backed financing package for AI chips. The market chose to read all three as evidence that the AI machine still has fuel in the tank, and for one session that interpretation was good enough to give the Nasdaq and semiconductors some CPR.

There is, of course, another way to read it, though, and one that has a tendency to come back and nip at your heels.

The AI buildout is becoming increasingly capital hungry.

That does not make the story broken, but it does mean the conversation is moving beyond whether demand exists and toward how the next trillion dollars of infrastructure actually gets financed. Anthropic heading toward a potentially enormous IPO, Meta tapping equity markets and SpaceX leaning on debt are not signs of a market starved of capital. They are signs of an ecosystem consuming it at industrial scale, and the fuel gauge is becoming part of the trade.

The AI boom has moved well past the stage where Wall Street admires the blueprints.

Now it wants to see the utility bill.

That is why this week’s hyperscaler earnings matter so much. Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) report Wednesday, Amazon (NASDAQ:AMZN) and Intel (NASDAQ:INTC) follow Thursday, and the focus will be less on whether revenues beat by a few percentage points than on what the companies plan to spend next, how much of that spending can still be financed internally and whether returns are keeping pace with capex.

The market was willing to suspend disbelief for a long time because the earnings growth was spectacular and the AI narrative kept paying. Last week was the first real reminder that the Street can admire the technology while still becoming uncomfortable with the price tag.

Monday’s rebound did not erase that question.

In fact, the flow picture suggests traders were not exactly throwing confetti.

Goldman’s desk described activity as only around four out of ten, with an overall sell skew and continued tech supply beneath the headline rally. Long-only accounts remained better sellers in information technology, health care and industrials, while hedge funds were much more balanced. The Mag Seven also lost some of their early advantage as the session wore on, with the S&P 493 ultimately keeping pace and slightly outperforming later in the day.

The index looked healthy enough from the balcony. Down on the floor, nobody was passing around champagne.

That is not the sort of internal picture that screams fresh momentum chase. It looks more like a market testing whether the floor is still there after last week reminded everyone how quickly the furniture can move when positioning gets crowded.

The S&P 500’s rally also stalled around the 50-day moving average, while most of the session’s gains were banked early and some selling pressure returned into the close. None of that kills the relief-rally argument, but it does tell you the market is still feeling around for conviction rather than sprinting back into last month’s playbook.

Credit offered a little more encouragement.

Hyperscaler CDS and data-centre debt rebounded modestly, which matters because last week’s concern was never just about equity valuations. The more serious risk was that AI capex anxiety could begin leaking into corporate financing conditions. As long as credit markets remain open and spreads remain contained, the buildout can keep eating.

The real trouble begins when equity investors lose patience at the same time creditors start charging more for the buffet.

For now, that has not happened.

The Fed could determine whether it stays that way.

A hike this week looks highly unlikely, with the market pricing only around a 10% chance of a move, but December remains very much alive. The Fed does not need to pull the trigger on Wednesday to tighten financial conditions; it merely has to leave the gun sitting visibly on the table.

That puts more emphasis on Kevin Warsh’s press conference than on the rate decision itself.

Treasuries were relatively quiet on Monday after last week’s much bigger unwind, although the short end underperformed and the curve flattened as yields pushed higher through much of the US session before bonds caught another late bid when oil softened. The 2-year auction also came with slightly weaker demand, particularly from indirect buyers, which is hardly a crisis but worth noting when the market is already trying to work out how much tightening remains in the system.

The bigger backdrop is the huge position reduction that went through Treasury futures late last week. Open interest fell heavily across the strip, including the largest de-risking in 10-year futures since the current contract became most active, which helps explain why Monday felt almost sleepy by comparison.

Yet the options market is still quietly leaning toward lower yields farther out the curve, with demand for long-bond calls strong enough to push skew toward upside protection.

That tells you some traders are still hedging against a world where growth worries eventually overpower the inflation story, even if the cash market spent Monday looking like it had finally found a chair and sat down.

Oil remains the joker in that deck.

WTI eased back toward $102 and Brent settled below $116 as Saudi, Turkish and Pakistani officials travelled to Tehran and Iranian officials sounded somewhat more open to a negotiated framework. That took a little geopolitical premium out of the front end, but the physical market is hardly waving the white flag.

Dated Brent rose even as futures softened, which is a useful reminder that physical barrels remain tight. Crude took one boot off the market’s throat, but it did not leave the room.

The Middle East itself also remains one headline away from undoing Monday’s calm. Saudi forces reportedly destroyed drones over Riyadh, Hezbollah is preparing for the possibility of a wider regional conflict and Trump has again said it is approaching “decision time” on whether Washington reaches a deal with Tehran or resumes attacks.

So yes, oil cooled.

The powder keg did not suddenly turn into a water feature.

European gas is telling the same story from a different angle. Prices have pushed above €97 per megawatt-hour, the highest since 2022, while EU storage is only around 75% full and Germany is sitting just above 61%. With colder weather approaching and Europe competing with Asia for a still-tight pool of global gas, the energy problem extends well beyond crude.

That is why Monday’s risk rally deserves to be enjoyed without being over-interpreted.

The market got a better hand than it feared over the weekend. AI financing anxiety eased, credit stabilised, oil backed away from the highs and no new geopolitical grenade landed in the middle of the trading floor. That was enough to give US stocks a bounce and hand Asia a more constructive opening.

Japan and South Korea are set to open firmer, with Korea particularly interesting after the semiconductor rebound and ahead of another round of AI-sensitive earnings. Australia looks more subdued, while US futures are holding onto Monday’s better tone.

There is also Brazil sitting off to the side as a useful reminder that idiosyncratic risk has not disappeared. Brazilian stocks, bonds and the real were hammered after Lula’s surprise re-election, showing once again that when politics punches a hole in the balance sheet, there is no global relief rally large enough to hide behind.

For Asia, though, the immediate setup is better.

Just not cleaner.

The AI trade has been given another day in court, credit has stopped bleeding and oil has taken one step back from the ledge. But the verdict still belongs to hyperscaler earnings, while the Fed controls the cost of money sitting underneath the entire exercise.

Asia gets the baton with the track a little clearer, but the hurdles are still standing.

Monday showed that the market is still willing to buy the AI dream.

This week will tell us whether it is still willing to finance it.

Finally, despite fragility in the AI trade, Bloomberg macro strategist, Michael Ball notes that renewed call buying in some of its hardest-hit names offers the Nasdaq a path to stabilize if earnings are in line and the Fed strikes the right tone.

Positive AI earnings guidance now comes with a much longer checklist than it did a year ago. Compute pricing has to hold up, utilisation has to stay high, equipment lives have to prove less fleeting than the technology cycle suggests, and financing costs cannot rise fast enough to swamp the economics. Anthropic’s IPO filing puts all of that back under the microscope at once.

The uncomfortable part is that cheaper tokens are great for users but potentially far less generous to the increasingly leveraged infrastructure builders funding the boom. In other words, being right about AI adoption is no longer the same thing as being right about where the profits ultimately land.

Yet the options market is starting to show a little life in the wreckage. The traditional AI capex names have been taken to the woodshed — the semiconductor index is down about 21% from peak to trough over the past month, while Nebius (NASDAQ:NBIS) and CoreWeave (NASDAQ:CRWV) have been hit even harder, off roughly 39% and 43% respectively. But traders are beginning to nibble again through longer-dated calls across those names and other chip suppliers, which tells you some are willing to pay for upside convexity after the washout.

I would not dress that up as a regime change just yet. These still look more like defined-risk bets on a rebound after severe drawdowns than a wholesale return of animal spirits, but they are helping drag Nasdaq put/call skew off recent highs. In other words, the dip buyers are starting to come back to the scene of the crime — just with helmets on this time.

That shift is worth watching because if the market can start repairing the names that have taken the heaviest punches, the index-level setup improves quickly. A rebound in the weakest AI names would take pressure off the Nasdaq’s undercarriage, broaden the recovery beyond the mega-caps and make the whole tape look a little less like a relief rally being held together with duct tape.