Stocks, futures rise as Fed bets ease after Warsh: Markets wrap

Stocks extended gains as traders pared bets on an interest-rate hike after United States Federal Reserve chairman Kevin Warsh refrained from signalling greater urgency to tighten policy despite this week’s hotter-than-expected inflation data. The dollar edged lower.

MSCI’s Asia Pacific equities gauge climbed 1.4%, while US equity-index futures climbed 0.2%. European shares were set to gain 0.8% at the open.

The modest uptick in sentiment – stocks were already higher as a rout in chip stocks eased – came after Warsh’s comments about the benefits of artificial intelligence (AI) to the US economy.

He made no remarks on monetary policy or his outlook for the US economy, save for reiterating that the Fed will deliver price stability.

“Warsh’s refusal to commit to another rate hike is resulting in some Fed-rate-hike bets being unwound,” said Charu Chanana, chief investment strategist at Saxo Markets. “His comment that ‘I don’t prejudge meetings’ after strong inflation prints is not helping the dollar.”

Traders reduced bets on a Fed rate hike in October to 15% after Warsh’s speech, from more than 25% on Oct 15. A Bloomberg gauge of the dollar fell 0.1%, after dropping 0.3% the prior session, which was the biggest decline in more than a month. 

Gold was little changed at US$4,172 an ounce. Treasuries stayed lower on the day as Warsh spoke, after rallying across the curve in US trading. Global crude oil benchmark Brent dropped 0.7% to US$105.20 a barrel.

Investors looked to Warsh’s speech in Bangkok for clearer signals on the policy path after the fastest US inflation in five months boosted expectations for further Fed tightening. US inflation has remained stubborn, fuelled by elevated oil prices since the Middle East war broke out.

“We made very clear that we would deliver price stability, and we removed a dose of accommodation about a month ago,” Warsh said in Bangkok. “I don’t prejudge meetings. I don’t believe in saying now what I might do at the meetings that we have in the balance of this year.”

The Fed raised rates by a quarter percentage point in September, the first hike since 2023. It was backed by all 19 policymakers, and a majority also saw another increase as likely in 2026. 

A few key officials in recent weeks reiterated that additional rate hikes may be needed, but emphasised they have time to gather economic data before acting again. 

“Markets are reassured to hear Warsh reiterating his belief that AI will uplift productivity in the medium term, which could help moderate inflation expectations and temper fears of back-to-back Fed rate hikes,” said Chang Wei Liang, a macro strategist at DBS Bank.

Stock markets were already rising on Oct 16 before Warsh’s comments as a selloff in chip stocks eased.

In Asia, Samsung Electronics and SK Hynix both advanced more than 4%. That helped South Korea’s Kospi Index rise 4% rebounding from the slump on Oct 15 that sent the gauge to its lowest close since April.

Indonesian stocks slumped as much as 11%, the most since January 1998, after MSCI said the country no longer merits emerging-market status. The rupiah also edged lower.

The durability of the equity rebound may depend on whether gains spread beyond the technology heavyweights that have driven much of the advance in 2026.

Broader participation across sectors would help reduce the market’s reliance on AI-linked stocks after this week’s volatility exposed the risks of that concentration.

“It seems like we are seeing a technical rebound, with the overall market settling down somewhat,” said Ryuta Otsuka, a strategist at Toyo Securities.

Volatility could remain relatively high next week as traders monitor earnings “while searching for a bottom”, he said. Bloomberg

Some of the main moves in markets:

Stocks

S&P 500 futures rose 0.1% as of 6.52am London time
Nasdaq 100 futures rose 0.1%
The MSCI Asia Pacific Index rose 1.4%
The MSCI Emerging Markets Index rose 0.9%
S&P 500 futures rose 0.1%
Japan’s Topix rose 1.8%
Hong Kong’s Hang Seng rose 1%
The Shanghai Composite rose 0.2%
Euro Stoxx 50 futures rose 0.8%

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro was little changed at US$1.1224
The Japanese yen was little changed at 157.86 per dollar
The offshore yuan was little changed at 6.6884 per dollar
The British pound rose 0.2% to US$1.3296

Cryptocurrencies

Bitcoin was little changed at US$82,063.28
Ether fell 0.3% to US$2,444.8

Bonds

The yield on 10-year Treasuries advanced three basis points to 5.09%
Japan’s 10-year yield advanced 4.5 basis points to 2.935%
Australia’s 10-year yield advanced two basis points to 5.23%

Commodities

Spot gold was little changed
West Texas Intermediate crude fell 0.7% to US$97.30 a barrel