Market Overview
Asian markets largely ended Tuesday in negative territory, with South Korea and Japan seeing significant sell-offs in technology and chipmaker shares driven by AI jitters and rising bond yields. This diverged from a rebound in US tech stocks overnight. European investor sentiment is poised for a cautious start amidst escalating political unrest in France and Italy, which has weighed on the Euro and raised concerns about fiscal stability. Elevated Brent crude prices, trading near a five-month high, continue to add inflationary pressure, influencing central bank outlooks as the Bank of England signals a likely interest rate hike.
Markets
Australian equities closed lower, with the S&P/ASX 200 (^AXJO) declining 0.33% to 8,816.90. Miners and banks were notable drags, despite a rebound in technology and consumer staples sectors.
Across Asia, markets saw broad declines. South Korea’s KOSPI (^KS11) plunged 3.73% to 5,552.74, while Japan’s Nikkei 225 (^N225) fell 1.30% to 64,075.42. Hong Kong’s Hang Seng Index (^HSI) was trading down 1.01% to 23,943.75 as of approximately 3:00 pm Hong Kong time, and Singapore’s Straits Times Index (^STI) was down 0.24% to 5,399.01 as of approximately 3:00 pm Singapore time. Mainland China’s Shanghai Composite (000001.SS) ended slightly up 0.05% at 3,732.70, while the CSI 300 index (CSI300) was down 0.54%.
In commodities, Brent Crude (BZ=F) finished 0.42% higher at $110.01 a barrel, maintaining its five-month high. WTI Crude (CL=F) declined 4.72% to $98.77. The Euro hovered near multi-month lows, with the EUR/USD (EURUSD=X) pair trading at 1.1231, up 0.05%.
US Treasury yields continued their climb from the previous session. The 10-year Treasury yield (^TNX) stood at 5.136%, up 3.80 basis points, and the 30-year Treasury yield (^TYX) was at 5.472%, up 3.60 basis points. In the prior US session, the S&P 500 (^GSPC) climbed 0.41% to 7,690.73, and the Nasdaq Composite (^IXIC) advanced 1.11% to 26,430.89, led by a rebound in tech shares.
What Drove Markets
Asian tech stocks diverged sharply from their US counterparts due to AI jitters and rising bond yields. South Korean and Japanese chipmakers saw significant sell-offs despite a rebound in US chip giants. Concerns over AI financing and profitability were exacerbated by a disastrous IPO debut for an AI data centre firm in South Korea, Elice, whose shares crashed as much as 33%, opening 16% below its initial public offering price. This led to SK hynix Inc. (000660.KS) falling 4.23% and Samsung Electronics Co., Ltd. (005930.KS) declining 2.98%. Japanese tech investor SoftBank Group Corp. (9984.T) suffered significant losses, down 6.01%, as credit-default swap spreads linked to the company rose to their highest levels in nearly four years, reflecting concerns over its AI-related financing needs and the possibility of a major acquisition. Tokyo Electron Limited (8035.T), a chip equipment maker, also declined 2.56%.
European political and fiscal instability weighed heavily on investor sentiment. Widespread social unrest in France, following a weekend of violent protests and concerns about the nation’s debt levels, led authorities to impose curfews in several cities. In Italy, the government announced plans to deploy 500 troops after several days of unrest. This political uncertainty contributed to the Euro’s weakness, which hovered near multi-month lows.
Persistent commodity inflationary pressures remained a key factor. Brent crude’s climb to near $110 a barrel, a five-month high, was driven by Middle East risks and uncertainty surrounding a potential easing of US restrictions on Russian energy.
Central bank policy divergence and expectations also influenced market dynamics. The Bank of England is signalling a likely interest rate hike next month, driven by stronger-than-expected UK wage growth, which saw wages excluding bonuses grow by 3.7% year-on-year in the three months to August, narrowly beating the 3.6% forecast. BoE Governor Andrew Bailey stated last week that the longer the Iran war continues, the harder it will be for the central bank not to respond to inflation pressures, though he also said that inflation pressures remained ‘quite subdued’. In contrast, the Federal Reserve and the European Central Bank are widely expected to leave rates unchanged at their upcoming meetings, though markets anticipate possible Fed hikes in December. The People’s Bank of China (PBOC) maintained its one-year loan prime rate at 3.00% and five-year rate at 3.50% on Tuesday, leaving both unchanged for a 17th consecutive month. Stronger-than-expected third-quarter growth reduced the urgency for immediate monetary easing.
Stocks to Watch
In Australia, BHP Group Limited (BHP.AX) declined 1.59% after its quarterly update showed copper production dipped 19% in September. Rival Rio Tinto Group (RIO.AX) closed 0.43% lower. National Australia Bank Limited (NAB.AX) fell 1.75% after announcing plans to slash 2,500 jobs, while Commonwealth Bank of Australia (CBA.AX) rebounded 0.14% from an intraday sell-off. Defensive asset Woolworths Group Limited (WOW.AX) gained 1.09% as investors piled into consumer staples. Elsewhere in Australian equities, Corporate Travel Management soared 23.4% to $3.06 after the International Air Transport Association released a $65 million guarantee. UBS downgraded Challenger to ‘neutral’ on a Daiichi offer. Small-cap Recce jumped 17% as a clinical trial verdict is awaited. PLS Group is set to offer up to $1 billion in senior notes. Codan dipped 0.4% as its chief executive plans to sell shares, and Ingenia Communities rose nearly 9.7% amid takeover bid negotiations. HUB24 gained 3.9% after posting $4 billion in quarterly net inflows.
On the previous US session, chip giant NVIDIA Corporation (NVDA) added to gains, climbing 1.38% to $217.09, while Tesla, Inc. (TSLA) jumped 3.76% to $368.06, and Alphabet Inc. Class A (GOOGL) advanced 1.05% to $344.18, as tech names led a rebound. AI company CoreWeave, Inc. (CRWV) attempted to recover some of its previous week’s decline, though it ultimately closed 0.44% lower to $61.12 despite a Goldman Sachs upgrade. The VanEck Semiconductor ETF (SMH) also climbed 1.61% to $548.46, reflecting the rebound in US chip stocks.