Asian stock markets surge on hopes of talks between US and Iran

Asian stock markets witnessed a rally on Tuesday due to hopes of potential talks between the US and Iran and a decline in oil prices. US President Donald Trump stated that there is a plan to hold back new military attacks against Iran, which created a positive sentiment in the market. These news developments come ahead of US inflation data, which could impact the future outlook of interest rates.

Brent crude futures were recorded at $91.56 per barrel, marking a 1 per cent decline, which is at a low level since early September. Investors are now hoping for potential talks between the US and Iran. Following the start of the US-Israel war with Iran in late February, inflation concerns had increased worldwide, leading major central banks to raise interest rates in recent months.

According to Nick Tweedale, Chief Market Strategist at ATFX Global, recent developments offer hope for an end to the war, but there remains a large gap between diplomatic efforts and a lasting peace treaty. He warned that if any signs of negotiations failing emerge, investors will once again add a geopolitical risk premium, which could lead to a sharp surge in oil prices.

The decline in oil prices has eased inflation concerns, supporting the stock market following the declines seen last week. South Korea's KOSPI rose by more than 5 per cent, while Japan's Nikkei saw an increase of approximately 3 per cent in early trade. The MSCI Asia-Pacific broad equity index jumped 1.5 per cent, rising above the seven-month low reached last week.

US markets also witnessed a rally. On Monday, the S&P 500 rose by 2.35 per cent, recording its largest single-day jump since April, while the Nasdaq climbed 2.7 per cent, marking its best day in four months. Anthony Segliemba, Chief Market Strategist at Ameriprise, stated that changes in expectations are healthy and that the AI trade currently appears to be working within its own settings.

Reports from tech companies this week will also serve as a test for the market. Reports from companies like Coreview will be a benchmark for investor concern. Segliemba termed Anthropic's potential IPO as a crucial test for investor confidence. Meanwhile, market attention was also on Nvidia, which is being investigated by the board to see if CEO Jensen Huang was a target of foreign intelligence operations. According to media reports, Huang had a close relationship with a Chinese businesswoman who provided information to Beijing. Huang has admitted to being unfaithful to his wife but has not disclosed details. These reports caused Nvidia shares to fall by 4.2 per cent.

Daniel Morgan, Portfolio Manager at Sinovus Trust, stated that some individuals in the technology sector are so closely tied to the company's success that it is difficult to separate them. However, he expressed confidence that even if Huang has to reduce his role, Nvidia will maintain its leadership in the GPU AI chip market.

Investors' eyes are now on US inflation data. According to a Reuters survey, economists expect headline consumer prices to have increased by 0.3 per cent and core prices by 0.2 per cent in October. These figures could influence the Federal Reserve's decision on raising interest rates next month.