Market Overview
Global technology shares continued to face pressure following a significant sell-off in US tech, driven by concerns over artificial intelligence (AI) spending sustainability and profitability. These jitters spilled into Asian markets and led European bourses to open lower.
In a mixed Asian session, China reported stronger-than-expected economic growth, though its markets struggled to maintain gains. Other Asian markets, notably Indonesia, experienced deep declines. Bucking the regional trend, Australia’s market concluded its Monday session higher, supported by M&A activity and a rally in energy stocks.
Markets
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Asia-Pacific Equities:
- Australia’s S&P/ASX 200 (^AXJO) closed its Monday session up 0.44% at 8,845.70.
- Japan’s Nikkei 225 (^N225) finished Monday trading lower by 0.62% at 64,916.70.
- South Korea’s KOSPI (^KS11) closed higher by 1.76% at 5,768.01 on Monday, recovering from earlier reported declines amid chip sector jitters.
- The Shanghai Composite (000001.SS) concluded Monday trading higher by 0.39% at 3,730.92, paring earlier losses.
- Indonesia’s Jakarta Composite Index (JKSE) plunged 5.05% to 4,923.26 on Monday, hitting its lowest level since early October 2020.
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European Equities:
- London’s FTSE 100 (^FTSE) was trading lower by 0.79% at 10,795.81 as of approximately 9:40 am London time.
- Frankfurt’s DAX (^GDAXI) was trading lower by 0.99% at 25,369.01 as of approximately 10:40 am Frankfurt time.
- Stoxx 50 futures were 0.31% lower, and France’s CAC 40 was down 0.46% ahead of its market open, according to CNBC.
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Commodities:
- Brent Crude (BZ=F) was trading lower by 2.39% at 107.23.
- WTI Crude (CL=F) was trading lower by 4.38% at 96.97.
What Drove Markets
Concerns surrounding the sustainability and profitability of massive artificial intelligence investments triggered a significant sell-off in global tech last week, notably impacting the Nasdaq. The S&P 500 lost nearly 2% last week, and the Nasdaq tumbled 4.48%, snapping a four-week winning streak, as reported by CNBC. These jitters spilled over into Asian markets. CoreWeave (CRWV), an AI-linked company, plummeted 11.91% in its latest trading session, marking a 30.59% weekly drop, with its credit default swaps reaching distress levels, according to CNBC. Goldman Sachs traders noted that AI credit spreads and hyperscalers were at their widest levels of the year, forcing investors to confront a potential slowdown in AI spending, CNBC reported. New, leaner AI models, such as an update from China’s DeepSeek, are also fuelling worries that less memory will be required. The Philadelphia Semiconductor Index fell 11.4% last week, its longest losing streak since 2008, Investing.com noted. Anna Wu, investment strategist at Floodline Research, stated that investors remain focused on rising Chinese competition and the global technology sell-off despite continued strength in memory demand, as reported by Investing.com.
Indonesian markets extended their sell-off after MSCI warned of a potential two-step downgrade from emerging market to standalone status, citing concerns over opaque shareholding structures and suspected coordinated trading. Goldman Sachs warned this could trigger substantial passive fund outflows. The Jakarta Composite Index tumbled over 5% on Monday to its lowest level since early October 2020, according to CNBC and Investing.com.
The Australian sharemarket managed to shrug off the global tech rout, closing higher on Monday. Bell Potter’s director of institutional sales and trading, Richard Coppleson, noted the ASX 200 performed better “thanks to the more defensive nature of our market.” The local bourse was buoyed by a flurry of M&A deals and a rally in energy stocks, which gained on a higher oil price that had settled around $US108 a barrel, according to AFR. Offsetting declines in its local tech sector, which shed 1.3 per cent, the energy sector rallied 2.2 per cent.
China reported stronger-than-expected economic growth of 4.5% year-on-year in the third quarter, beating estimates, as robust foreign demand for the country’s technological goods largely offset drags from a deepening property slump and sluggish consumer demand, CNBC and Investing.com reported. Despite this positive data, mainland Chinese equities only pared earlier losses, reflecting cautious broader market sentiment. China’s memory-chip maker ChangXin Memory Technologies (CXMT) plunged 7.6%, reversing recent gains amid concerns its progress in next-generation DRAM could intensify competition, Investing.com noted.
Stocks to Watch
- CoreWeave (CRWV): The AI-linked company’s shares plummeted 11.91% in its last trading session and were down 30.59% for the week, highlighting investor concerns about AI financing and sustainability.
- Woodside (WDS.AX): Rallied 2.69% to 34.03 on Monday, contributing to the strong performance of Australia’s energy sector.
- Samsung Electronics (005930.KS) and SK Hynix (000660.KS): South Korean chip makers saw their shares rise 1.16% to 218,000.00 and 0.39% to 1,277,000.00 respectively on Monday, even as the broader chip sector remained under pressure.
- Taiwan Semiconductor Manufacturing Co. (2330.TW): Shares were flat on Monday, with Taiwan’s semiconductor-heavy market remaining pressured by AI spending scrutiny.
- Australian Tech Stocks: Xero (XRO.AX) was off 2.8 per cent to $60.32 and TechnologyOne (TNE.AX) was down 1.9 per cent to $31.30 on Monday, according to AFR, reflecting weakness in the local tech sector.
- M&A Activity in Australia: Cleanaway shares were up 20.2 per cent to $2.97, Challenger up 19.3 per cent to $11.75, and Ingenia Communities up 7.1 per cent to $4.24 on Monday, according to AFR, following takeover offers. Data centre operator NextDC entered a trading halt at market open on Monday pending an update on the power supply for its M3 Melbourne site, AFR reported.
- Ampol: Shed 2.5 per cent to $41.93 on Monday, despite reporting a more than doubled refining margin in the September quarter, with RBC Capital Markets noting “negative” sentiment due to missed expectations, according to AFR.
- US Tech Giants: Netflix, Tesla (TSLA), Meta Platforms (META), and IBM (IBM) are scheduled to report earnings this week. Their performance will be crucial in testing confidence in the AI trade. Tesla was down 2.13%, Meta Platforms fell 3.72%, and IBM declined 0.85% in their last trading session (October 16).
- Semiconductor Equipment Makers: Lam Research (LRCX) and Texas Instruments (TXN) are also set to report earnings, providing a key outlook for the chip sector. Lam Research fell 4.87% and Texas Instruments declined 0.95% in their last trading session (October 16).