Market Overview
Global markets remained under pressure following a sharp US technology sell-off led by Alphabet, as investors questioned the profitability and growing capital requirements of artificial intelligence. Intel and Amazon subsequently reported disappointing outlooks after the US market closed, adding to concerns about the sector. Asian markets were mixed, with weakness in Japanese and South Korean technology shares contrasting with gains in Australia and Hong Kong. Brent and WTI crude prices diverged amid continuing Middle East tensions, while investors assessed the Bank of Japan’s latest interest-rate decision and the outlook for monetary policy across the region.
Markets
US equities saw declines in the previous session, with the Nasdaq Composite recording a 1.38% loss and the S&P 500 falling 0.30%. The Dow Jones Industrial Average also edged lower by 0.25% to 52,342.56. For October, the Nasdaq Composite is heading for a 2.5% fall, while the S&P 500 is on track for a 0.9% advance, and the Dow is on pace to rise 2.8%, according to CNBC.
In Asia, markets presented a mixed picture. Australia’s S&P/ASX 200 Index closed 0.18% higher at 8,908.10, paring earlier gains for the session. Japan’s Nikkei 225 was down 2.11% to 63,296.88 as of approximately 2:15 pm Tokyo time. South Korea’s KOSPI Composite Index slumped 3.52% to 5,728.42 as of approximately 2:10 pm Seoul time, while the Shanghai Composite declined 0.17% to 3,645.34 as of approximately 1:15 pm Shanghai time. Singapore’s Straits Times Index was down 0.45% to 5,371.53 as of approximately 1:15 pm Singapore time. Countering the trend, Hong Kong’s Hang Seng Index rose 1.75% to 23,361.03 as of approximately 1:15 pm Hong Kong time.
In commodities, Brent Crude closed 2.62% lower at $111.87 per barrel, while WTI Crude advanced 0.90% to $102.92, with prices reacting to ongoing geopolitical tensions. The US Dollar Index closed 0.21% lower at 101.82, and the Australian dollar fell 0.29% against the greenback to 0.7037.
Cryptocurrencies also saw declines, with Bitcoin closing 3.48% lower at $78,441 and Ethereum falling 4.91% to $2,242, following reports of a significant security incident on Binance.
What Drove Markets
Global Tech Sell-off and Intensified AI Trade Scrutiny: The primary driver of recent market weakness was disappointing quarterly results from major US technology companies. Google owner Alphabet’s shares (GOOGL) plunged 12.64% to $283.82, marking its biggest one-day fall in history, according to AFR. This decline was fueled by renewed fears that artificial intelligence (AI) could erode its core advertising business. Intel (INTC) finished the regular US session down 3.62% at $92.07, while Amazon (AMZN) closed 4.25% lower at $243.79. Both companies subsequently reported earnings after the closing bell. Intel issued a weaker-than-expected fourth-quarter outlook amid PC-market headwinds and supply constraints, while Amazon’s holiday-quarter sales guidance disappointed investors despite strong growth in its cloud business. The broader AI trade also faced intense investor scrutiny over the capital intensity and ultimate profitability of AI investments. “Neocloud” companies like CoreWeave (CRWV), which closed 4.99% lower at $60.74, saw its shares crater 30% in October, while Nebius (NBIS), down 5.68% to $171.99, is heading for a 27% decline for the month amid concerns over debt levels, according to CNBC. The Roundhill Memory ETF (DRAM) is off 14% in October, and the iShares A.I. Innovation and Tech Active ETF (BAI) is down 10% for the month.
Geopolitical Tensions Fuel Oil Price Volatility: Middle East tensions continued to influence energy markets, although the two major crude benchmarks moved in opposite directions in the authoritative Market Data Pack. Brent crude fell 2.62%, while WTI advanced 0.90%. Continuing uncertainty over regional supply disruptions contributed to volatility, reinforcing concerns about the potential inflationary impact of energy prices.
Divergent Central Bank Paths and Persistent Inflation Watch: Central banks continue to grapple with their monetary policy responses. The Bank of Japan (BOJ) opted to hold its policy rate steady at 1.25% on Friday, following its September hike, according to Investing.com. Markets are now focused on Governor Kazuo Ueda’s upcoming comments and economic forecasts for clues on future tightening, with data showing Tokyo’s core consumer price index rose 2.6% year-on-year in October, matching economists’ expectations. Meanwhile, the Reserve Bank of New Zealand held its official cash rate at 2.75% on 28 October, although further tightening remains possible if inflation pressures persist. Elevated oil prices further complicate the inflation outlook, maintaining central banks on high alert.
Mixed Performance Across Asian Markets: While broad Asian indices saw declines, heavily influenced by the tech sector’s weakness, some markets demonstrated resilience. Australia’s S&P/ASX 200 Index had earlier tracked as much as 1 per cent higher on Friday afternoon before paring gains, according to AFR. In Australia, consumer discretionary stocks initially rebounded, while a disappointing sales update from Coles weighed on consumer staples. Coles shares fell as much as 12.5% before paring their decline to 7.9%, according to AFR. Conversely, the Australian mining sector faced headwinds from falling copper and lithium prices and specific operational challenges, with Rio Tinto (RIO.AX) declining 1.75% to $147.07 following developments at its Oyu Tolgoi mine in Mongolia, where underground production was halted after a rockfall injured three people, AFR stated. Other mining stocks also fell, with Liontown Resources down 5.7%, PLS off by 3.8%, Deep Yellow shedding 8% of its share price, and Lynas Rare Earths declining 6.5%, according to AFR. In South Korea, the KOSPI Composite Index slumped sharply, primarily dragged down by losses in major chipmakers, with Samsung Electronics down 2.48% and SK Hynix Inc down 5.44%, according to Investing.com. Meanwhile, Hong Kong’s Hang Seng Index posted gains despite the broader regional technology market weakness.
Stocks to Watch
Alphabet (GOOGL) witnessed its biggest one-day fall in history, plunging 12.64%, after disappointing earnings raised concerns about AI’s impact on its core advertising business. Intel (INTC) closed 3.62% lower before reporting disappointing fourth-quarter guidance after the US market close. Amazon (AMZN) fell 4.25% during regular trading, then released weaker-than-expected holiday-quarter sales guidance, despite strong cloud revenue growth.
The intense scrutiny on the AI trade also keeps CoreWeave (CRWV) and Nebius (NBIS) in focus, with their shares cratering 30% and heading for a 27% monthly decline, respectively, due to investor concerns over debt levels.
In Australia, Coles plunged 12.5% on a weak sales update before paring losses to 7.9%. Mining giant Rio Tinto (RIO.AX) declined 1.75% amid sector pressures and operational challenges at its Oyu Tolgoi mine. South Korean chipmakers Samsung Electronics and SK Hynix Inc were down 2.48% and 5.44% respectively, dragging the KOSPI lower.
The significant security incident on Binance also impacted major cryptocurrencies, with Bitcoin (BTC-USD) down 3.48% and Ethereum (ETH-USD) falling 4.91% in the session.