(Nov 2) : Asian stocks were set to fall, tracking Friday’s sharp Wall Street selloff as a rout in technology shares deepened concerns that a rally in artificial intelligence may have gone too far.
Equity-index futures for Japan and South Korea pointed lower, while those for Australia were little changed after disappointing US tech earnings triggered the worst stock selloff since June on Friday, with the Nasdaq 100 tumbling 3.5% and briefly entering a technical correction.
Intel Corp. suffered its steepest drop in more than four decades, while the S&P 500 slid 1.8% and breached its 100-day moving average. The Philadelphia Semiconductor Index plunged 7.2%.
Brent crude advanced Friday as traders weighed the risk of renewed US military action against Iran and potential disruptions to Middle East supplies, as several tankers were targeted in the Strait of Hormuz over the weekend. Gold fell 3.7% to its lowest close in more than a year on Friday. Meanwhile, the dollar traded steady in early Monday trading.
Investors are showing less tolerance for tech companies whose core businesses are slowing as AI spending surges. Results from Alphabet Inc. and Amazon.com Inc. fueled concerns that AI is eroding the businesses financing those investments. Traders are bracing for more volatility, with US midterm elections this week and Nvidia Corp. earnings later in November.
“The revelation that these hyperscalers are seeing a slowdown in their core businesses means that the big payoff that everyone has been saying will come eventually is getting pushed even further down the road,” said Matt Maley at Miller Tabak.
The advertising, consumer and retail businesses underpinning a collective US$750 billion in AI spending by America’s tech giants this year are beginning to show signs of slowing, raising questions about how long the investment boom can continue at its current pace.
Elsewhere, Binance recorded a net outflow of US$3.6 billion in cryptoassets after restoring customer withdrawals on Sunday. The world’s largest cryptocurrency exchange said the flight of funds eased after an initial spike. Binance had frozen withdrawals following Thursday’s US$6.3 billion hack while it investigated and stabilized the platform, and pledged to reimburse customers in full.
In Asia, China’s central bank and securities regulator will hold a meeting Monday to discuss the use of tools designed to support the country’s capital market, according to local media.
The CSI 300 Index tumbled into a bear market in October, falling 8.5% and dropping for a record 12 straight weeks.
Friday’s selloff delivered a long-awaited jolt of volatility after disappointing earnings from technology giants intensified concerns about the durability of the AI-driven rally. The Cboe Volatility Index touched its highest intraday level since April, while demand for puts protecting against further losses surged and correlations among stocks climbed, signs of mounting stress. Still, those measures remain well below levels reached in March after the US and Israel attacked Iran.
The pullback is also prompting some investors to look for buying opportunities. Morgan Stanley’s Mike Wilson said he sees several “clearing events” ahead that could temporarily push stocks lower and create an opportunity for investors to add exposure.
“This looks more like a bullish rotation with a derating at its core than the beginning of a broad market deterioration,” said Florian Ielpo, head of macro research at Lombard Odier Investment Management.
uploaded by Isabelle Francis