(Feb 13): Stocks remained under pressure on Friday as sentiment deteriorated after artificial intelligence (AI)-related concerns triggered a sell-off in US technology shares. Gold and silver rebounded in choppy trading.
Equity-index futures for the US fell 0.4% and Asian shares slumped 1.4% — the first decline in six sessions after Wall Street gauges fell on Thursday. The MSCI All Country World Index — one of the broadest indicators of global equities — is set for its first back-to-back weekly losses this year. Contracts indicated a tepid open for Europe.
As the volatility gauge spiked, gold and silver — which had advanced alongside stocks this year — recovered from the plunge in the last session. Treasuries pared some of Thursday’s gains, when a risk-off mood drove investors into the perceived safety of US government bonds. The benchmark 10-year yield climbed two basis points to 4.11% ahead of Friday’s US inflation data. The dollar rose.
The sharp swings reflected the rising stakes tied to the AI boom and the unpredictable ripple effects across sectors, regions and asset classes. The moves over the past two sessions also highlighted how quickly shifts in sentiment around AI can reverberate far beyond the technology sector with the emergence of the so-called AI scare trade.
“Software stocks are now trading like banks in 2008,” said Nick Ferres, the chief investment officer of Vantage Point Asset Management in Singapore, referring to the global financial crisis. “Asia has performed well so far this year, but I am concerned about correlation to global markets and a tactical unwind,” he said.
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The worries over AI-fuelled disruption underscore a sea change in market sentiment. Enthusiasm for the technology drove the lion’s share of stock market gains over the last few years.
That’s been replaced by worries that the newest tools released by Google, closely held AI developer Anthropic and a slew of lesser-known startups are already good enough to threaten a wide array of companies, many far outside the umbrella of technology.
Thursday’s losses erased the year-to-date gains for the S&P 500, which is now down 0.2%. The Nasdaq 100 Index has lost 2.2% year-to-date. In comparison, the MSCI Asia-Pacific Index is up about 13% this year, building on gains in each of the past three years.
See also: Asian stocks make best start versus US this century
Chinese shares dropped as investors trimmed risks before the Lunar New Year holidays on the mainland and in Hong Kong.
Also, Asian technology shares have performed well with MSCI’s gauge for the sector up 21%. The Kospi Index, a poster child for AI investments, has gained 31% and is the world’s best-performing stock market this year.
In contrast to the volatility in the US, the impact on Asian markets have so far been relatively limited, said Tomo Kinoshita, a global market strategist at Invesco Asset Management Japan Ltd.
“That said, as AI adoption is expected to advance over time, it’s highly likely that similar developments to those seen in the US could eventually emerge in Asia as well,” he said.
US President Donald Trump’s administration is planning to scale back some tariffs on steel and aluminium goods, the Financial Times reported. Aluminium prices fell.
The key event for traders on Friday will be the release of US January inflation data. The median forecast is predicting a year-over-year increase of 2.5% for the core consumer price index, which strips out food and energy.
Traders continued to assign little chance that US Federal Reserve (Fed) officials will lower rates when they meet next in March, with a July cut fully priced in.
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The inflation print has gained added significance after Wednesday’s jobs numbers indicated strength in the US economy. That prompted traders to pare bets on interest-rate cuts by the Fed. Money markets pushed back bets for an easing to July from June previously.
Markets are complacent on the outlook for US inflation, making trades that pay out if price pressures climb look attractive, said Benjamin Wiltshire at Citigroup Inc. Investors may be underestimating the resilience of the US consumer and market expectations for inflation are likely to be revised slightly higher, he noted.
“Markets seem to have this conviction that inflation is going to come down,” Wiltshire said in an interview. “We are still in a structurally higher inflation environment.”
Corporate highlights:
- Clear Street Group Inc, a Wall Street broker built on cloud computing technology, has postponed its US initial public offering after cutting the target by nearly two-thirds.
- OpenAI is releasing its first AI model that runs on chips from semiconductor start-up Cerebras Systems Inc, part of a push by the ChatGPT maker to broaden the pool of chipmakers it works with beyond Nvidia Corp.
- Westpac Banking Corp’s first-quarter profit advanced amid gains in home loans and strong growth in institutional lending.
- CK Hutchison Holdings Ltd has warned AP Moller-Maersk A/S of legal action should the Nordic company’s terminal unit try to take over operations at two ports near Panama’s strategic canal.
Some of the main moves in markets:
Stocks
- S&P 500 futures had fallen 0.3% as of 6.48am London time on Friday
- Nasdaq 100 futures fell 0.4%
- Futures on the Dow Jones Industrial Average fell 0.3%
- The MSCI Asia-Pacific Index fell 1.4%
- The MSCI Emerging Markets Index fell 0.8%
- S&P 500 futures fell 0.3%
- S&P/ASX 200 futures fell 1.4%
- Hong Kong’s Hang Seng fell 1.9%
- The Shanghai Composite fell 1.3%
- Euro Stoxx 50 futures were little changed
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.1% to US$1.1855
- The Japanese yen fell 0.4% to 153.31 per dollar
- The offshore yuan fell 0.1% to 6.9072 per dollar
- The British pound fell 0.2% to US$1.3598
Cryptocurrencies
- Bitcoin rose 0.4% to US$66,054.16
- Ether rose 0.3% to US$1,928.24
Bonds
- The yield on 10-year Treasuries advanced one basis point to 4.11%
- Germany’s 10-year yield declined one basis point to 2.78%
- Britain’s 10-year yield declined two basis points to 4.45%
- Japan’s 10-year yield declined two basis points to 2.210%
- Australia’s 10-year yield declined six basis points to 4.75%
Commodities
- Spot gold rose 0.6% to US$4,951.83 an ounce
- West Texas Intermediate crude fell 0.2% to US$62.73 a barrel
Uploaded by Tham Yek Lee
