(Feb 18): Asian stocks rose in thin holiday trading even as uncertainty over the outlook for AI continued to weigh on global equities.
The MSCI Asia Pacific Index advanced 0.6% to break three days of losses, with Japanese shares rising. Trading volumes are expected to be light, with markets in China, Hong Kong and several regional exchanges remaining closed for the Lunar New Year holiday.
Elsewhere, West Texas Intermediate crude oil held its losses from the prior session after positive talks between the US and Iran over the Opec member’s nuclear programme, paring crude’s risk premium. Gold held its losses from the past two sessions to trade below US$4,900 an ounce, but is still up almost 13% this year.
Anxiety around artificial intelligence (AI) is also a concern in Asia, home to much of the world’s chip development and hardware manufacturing. The upheaval driven by AI highlights a clash between fears the technology will upend swaths of the economy and doubts that massive spending on it will generate meaningful returns anytime soon.
“The market is still close to record highs, but it may not feel that way to some investors because of the sharp selloffs that seem to derail upswings almost as soon as they begin,” said Chris Larkin at E*Trade from Morgan Stanley. “If that theme persists, it could result in a bumpy road for the market, even if the overall trend is to the upside.”
Meanwhile, New Zealand’s dollar slid and stocks rose after the nation’s central bank held interest rates at the lowest level in three-1/2 years. The yield on New Zealand’s 10-year bond traded one basis-point lower at 4.41%.
See also: Oil gains on Iran, stocks tepid in holiday trading
Investors are also focused on the Federal Reserve’s path for interest rates after strong jobs data and benign inflation readings last week.
Fed governor Michael Barr said on Tuesday that rates should remain steady “for some time,” until officials see more evidence that inflation is heading towards the central bank’s 2% goal. Fed Bank of Chicago president Austan Goolsbee, meanwhile, said there was potential for more cuts this year if inflation continued on its path towards that target.
The yield on 10-year Treasuries was slightly lower at 4.05% on Wednesday, after gaining about one basis point in the last session.
See also: Asian stocks set to climb after US CPI lifts mood
In trade-related news, Japan plans to invest US$36 billion in US oil, gas and critical mineral projects, the first tranche of its US$550 billion commitment under the agreement it struck with US President Donald Trump.
Technology and the impact of AI are the dominant themes in markets.
The stock market turmoil unleashed by the artificial-intelligence (AI) industry reflects two fears that are increasingly at odds.
One is that AI is poised to disrupt entire segments of the economy so dramatically that investors are dumping the stocks of any company seen at the slightest risk of being displaced by the technology.
The other is a deep skepticism that the hundreds of billions of dollars that tech giants like Amazon.com Inc, Meta Platforms Inc, Microsoft Corp and Alphabet Inc are pouring into AI every year will deliver big payoffs anytime soon.
“A few months ago, the market debated whether AI was real,” said Jean Boivin at BlackRock Investment Institute. “Today, it’s seen as an active threat to business models. We believe the hunt to sort the winners and losers reinforces AI’s massive buildout — and the borrowing spree to finance it.”
Corporate News:
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- Warner Bros agreed on Tuesday to reopen negotiations with Paramount after receiving a revised proposal last week that sweetened some of its terms.
- Berkshire Hathaway Inc slashed its stake in Amazon.com Inc by more than 75% in the fourth quarter, while also building a stake in the New York Times Co.
- National Australia Bank Ltd’s profit climbed in the first quarter amid business banking growth and strength in home lending.
- Apple Inc is accelerating development of three new wearable devices as part of a shift towards artificial intelligence-powered hardware.
- Meta Platforms Inc has agreed to deploy “millions” of Nvidia Corp processors over the next few years, tightening an already close relationship between two of the biggest companies in the artificial intelligence industry.
- Palo Alto Networks shares fell 8% in extended trading, after the security software company gave a forecast for adjusted earnings that was weaker than expected for both the third quarter and the full year.
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.1% as of 10:08am Tokyo time.
- Nikkei 225 futures (OSE) rose 0.7%.
- Japan’s Topix rose 1.2%.
- Australia’s S&P/ASX 200 rose 0.4%.
- Euro Stoxx 50 futures were little changed.
Currencies
- The Bloomberg Dollar Spot Index was little changed.
- The euro was little changed at US$1.1846.
- The Japanese yen was little changed at 153.27 per dollar.
- The offshore yuan was little changed at 6.8877 per dollar.
- The Australian dollar fell 0.1% to US$0.7078.
Cryptocurrencies
- Bitcoin fell 0.8% to US$67,102.66.
- Ether fell 1.2% to US$1,974.94.
Bonds
- The yield on 10-year Treasuries was little changed at 4.05%.
- Japan’s 10-year yield declined 2.5 basis points to 2.110%.
- Australia’s 10-year yield advanced three basis points to 4.71%.
Commodities
- West Texas Intermediate crude was little changed.
- Spot gold rose 0.2% to US$4,888 an ounce.
This story was produced with the assistance of Bloomberg Automation.
Uploaded by Liza Shireen Koshy
