Asian Stocks Rebound as Korea Jumps 4% on Strong US Earnings, While Brent Crude Tops $110

After a bruising stretch for global technology stocks, Asian markets bounced back on Wednesday, October 21, as better-than-expected corporate earnings in the United States restored some confidence among investors.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.5% early in the session, according to Reuters, while South Korea's market jumped about 4%. Japan's Nikkei 225 gained 1.3%, and US S&P 500 e-mini futures rose 0.3%, pointing to further gains on Wall Street.

The rally followed a 0.3% rise in the S&P 500 overnight, supported by easing oil prices and Treasury yields during the US session and a run of strong earnings. With 13% of S&P 500 companies having reported third-quarter results, 86% have beaten analysts' earnings estimates, according to LSEG data.

Korea leads the rebound

South Korea's sharp rise came a day after a punishing session. On Tuesday, the Kospi fell 3.73% to its lowest close since April 7, dragged down by the slump of AI cloud company Elice on its market debut and renewed selling in chip stocks. The Korean market, dominated by memory chip makers Samsung Electronics and SK hynix, has been among the most volatile in the world as investors reassess the AI boom.

Wednesday's rebound reflected a willingness among investors to buy back beaten-down shares after strong US earnings eased fears that AI-related companies would disappoint. However, analysts cautioned last week that short-covering is very different from investors having the conviction to rebuild aggressive positions in AI stocks.

In India, the Sensex climbed more than 800 points in early trade on Wednesday and the Nifty IT index hit an eight-month high, as positive global cues combined with domestic optimism about a US-India trade deal and the opening of Jio Platforms' record IPO.

Earnings season takes centre stage

The third-quarter earnings season has become the focus for investors trying to judge the health of the global economy and the AI investment cycle. A high proportion of companies beating estimates suggests that corporate profits remain resilient despite high interest rates and elevated energy costs.

Results from major technology companies this week are being watched especially closely. SpaceX reported its first profit as a public company on Tuesday, driven by a surge in AI revenue, while Meta and Tesla are due to report later in the week. Investors want evidence that massive investment in AI infrastructure is translating into revenue and profit.

Goldman Sachs has estimated that five AI hyperscalers will raise their combined capital expenditure to about $1.2 trillion next year, underlining the scale of the bets being made.

Oil climbs again

Energy markets moved in the opposite direction to the overnight easing. Brent crude rose 1.1% to $110.03 a barrel in Asian trade on Wednesday after touching a five-month high on Tuesday, according to Reuters. Tensions in the Middle East, including disruptions to shipping around the Strait of Hormuz, have kept oil prices elevated, even after US President Donald Trump waived sanctions on Russian energy exports last week.

High oil prices are a concern for importing economies such as India, Japan and South Korea, as they raise import bills, weaken currencies and feed inflation. They also complicate the job of central banks trying to bring inflation under control.

Bonds and currencies

The US 10-year Treasury yield rose 1 basis point to 5.123%, remaining near multi-decade highs. Elevated yields reflect expectations that the Federal Reserve could raise interest rates again, with traders pricing a high probability of a hike in December.

In Europe, France's 10-year government bond yield rose 2.7 basis points to 4.94%, as political uncertainty following violent cost-of-living protests continues to weigh on French assets. Analysts have also revived debate about the "doom loop" between European governments and the banks that hold their bonds, as bond sell-offs raise questions about bank balance sheets.

The Japanese yen weakened 0.1% to 158.33 per dollar. Bank of Japan Deputy Governor Ryozo Himino signalled on Wednesday that the central bank is ready to raise rates again, saying underlying inflation is close to the 2% target.

Bitcoin rose 0.3% to $82,988.76, and Ether gained 0.2% to $2,452.59.

A market still searching for direction

Despite Wednesday's gains, investors remain cautious. The past two weeks have seen sharp swings in technology stocks, driven by concerns about AI spending, Chinese competition in memory chips and rising financing costs. Political risks are also mounting, with Brazil's presidential runoff approaching, US midterm elections in early November and unrest in Europe.

The Federal Reserve's policy meeting on October 27 and 28 will be the next major event for global markets. While traders expect the Fed to hold rates at that meeting, any signal about a December hike could move bond yields and equities sharply.

Why Korea matters to the AI trade

South Korea's stock market has become one of the world's clearest barometers of sentiment towards artificial intelligence. Samsung Electronics and SK hynix are among the largest producers of memory chips, including high-bandwidth memory used alongside AI processors in data centres. Their share prices, and therefore the Kospi, are highly sensitive to expectations about AI investment.

When investors are optimistic about AI demand, Korean stocks tend to outperform; when doubts emerge, they are among the first to be sold. That has made the Kospi especially volatile this year, as sentiment towards AI has swung between enthusiasm and concern about overspending. Foreign investors, who own a large share of Korea's biggest chip stocks, have driven many of those swings.

The India angle

For India, strong Asian markets and better US earnings tend to improve risk appetite among global investors. India has seen foreign portfolio outflows this year, partly as funds rotated into AI-linked markets in North Asia. A broadening of the rally beyond AI stocks could benefit Indian equities, which have relatively little exposure to semiconductors but strong exposure to IT services and domestic consumption.

What it means for investors

For investors in Asia and India, Wednesday's rebound offers some relief but not a clear change in direction. Strong earnings are supportive, but high oil prices, elevated bond yields and uncertainty about AI valuations mean volatility is likely to persist.

The coming days, with results from Meta, Tesla and major chipmakers, will provide a clearer test of whether the AI trade has found its footing or faces further turbulence.