Asia open: The disinflationary tug from lower Oil prices

Asian markets are set to open on a firmer footing Thursday, riding the tailwind from Wall Street’s rebound and softer Treasury yields, with encouraging signs that global inflationary pressures are finally loosening their grip. All three major U.S. indices closed in the green on Wednesday, fueled by gains in banks and small caps, though Big Tech remains under the bear's glare. Still, Nvidia, the darling of the AI revolution, saw a nice recovery bounce from yesterday's swoon, but all eyes are now locked on TSMC's third-quarter results.

Taiwan Semiconductor Manufacturing Co., the global leader in advanced AI chips, is expected to post a massive 40% profit jump to T$298.2 billion ($9.27 billion), thanks to surging demand for artificial intelligence applications. As the go-to producer for AI heavyweights within the Magnificent 7, TSMC's earnings will set the tone for tech stocks. A miss or weak forward guidance could shock Big Tech, reigniting selling pressure. Conversely, if TSMC hits or exceeds estimates, expect Asia’s trading session to kick off with a bullish momentum, even with the dollar inching higher.

The broader market sentiment looks favourable, buoyed by falling oil prices for the fourth day. While sliding oil prices usually signal weaker global demand, the silver lining for investors is the disinflationary relief that central banks are eager to see. Lower oil prices, coupled with easing inflation, could pave the way for more dovish central bank policies, which is music to the ears of investors hungry for rate cuts.

If there’s one thing the market loves, it’s the promise of lower interest rates, and the price signals from around the world over the past 24 hours seem to reinforce that narrative. Investors in Asia will watch closely to see if this optimism carries through into Thursday’s session, setting the stage for a potentially bullish day.