Asian Stocks Climb Cautiously Amid Oracle’s Tech Shakeup
Asian stocks rose in early trading on Friday, buoyed by the strength seen overnight. However, a new drop in Oracle’s share price caused unease within the tech sector. Financial markets faced a swift adjustment this week following the Federal Reserve’s interest rate cut, which was accompanied by a less hawkish outlook than anticipated. Additionally, the resurgence of concerns regarding an AI bubble further heightened the tension for investors. MSCI’s broadest index of Asia-Pacific shares outside Japan rose by 0.7 percent, following the upward trend of US markets on Thursday. The Dow and Russell 2000 indices reached new highs, while the Nasdaq experienced a decline. In morning trade, Tokyo’s Nikkei 225 demonstrated strong performance, rising by 1 per cent as shares of Softbank Group experienced a notable increase of 6 per cent following a report indicating that the company is contemplating the acquisition of the US data centre firm Switch Inc.
S&P 500 e-mini futures remained unchanged, while Nasdaq futures declined by 0.2 percent as markets exhibited caution following a 13 percent drop in Oracle shares. This decline triggered a tech selloff, fueled by concerns over the company’s substantial spending and lackluster forecasts, raising questions about the timely returns on significant investments in AI. “Oracle announced disappointing earnings alongside further investment in data centres, triggering fresh concerns about AI-related spending, with investors questioning whether the high level of investment will ultimately deliver the required returns,” analysts wrote in a research note. Tech stocks found some support following Broadcom’s projection of first-quarter revenue that exceeded market estimates on Thursday. However, gains were moderated after the company announced that margins would decline due to an increased proportion of AI revenue, resulting in a 5 percent drop in its shares during extended trading.
The US dollar index, which measures the greenback’s strength against a basket of six currencies, was last recorded at a two-month low of 98.30, following the Fed’s less hawkish than anticipated outlook on rates. Overnight, the dollar faced additional pressure as jobless claims data revealed that the number of Americans filing new applications for unemployment benefits rose by the largest margin in nearly 4-1/2 years last week. The data frequently exhibit volatility during this period, and the four-week average of claims indicates that labor market conditions have remained stable. Fed funds futures indicate a 75.6 per cent probability that the US central bank will maintain interest rates at its upcoming meeting on 28 January, an increase from the 73.9 per cent chance noted a day prior, as reported. Markets are anticipating at least two rate cuts for the upcoming year following Fed Chair Jerome Powell’s statement at a post-policy press conference, where he remarked that he did not “think a rate hike is anyone’s base case.” The yield on the US 10-year Treasury bond was last recorded at 4.151 percent, reflecting an increase of 1.2 basis points compared to late US levels.
Brent crude increased by 0.5 per cent to $61.59 as investors turned their attention to the Russia-Ukraine peace talks, following an earlier rise due to reports of the US seizing an oil tanker off the coast of Venezuela. On Thursday, the US announced new sanctions aimed at Venezuela, placing restrictions on three nephews of President Nicolas Maduro’s wife, along with six crude oil tankers and shipping companies associated with them. The markets for precious metals have retreated from their recent peaks. Gold remained steady at $4,281.91, whereas silver saw a decline from its record highs, decreasing by 0.6 percent to $63.17. Crypto markets continued to face challenges, with bitcoin declining by 0.4 percent to $92,571.96 and ether falling by 0.6 percent to $3,231.69.
