Asian markets opened lower on Monday, continuing the trend from last week as investors prepare for significant upcoming central bank decisions and earnings reports from major technology companies. Despite a drop in oil prices providing some relief after a surge to a six-month high on Friday, market sentiment remains cautious amid concerns over potential U.S. military actions against Iran following next week's midterm elections.
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Stocks of AI-related firms are under pressure as doubts grow about the sustainability of the substantial investment influx that drove earlier record highs in the first half of the year. There is increasing anxiety regarding the returns on the significant capital invested in the sector, compounded by rising interest rates and bond yields that are calling into question the financial stability of these companies.
This week, earnings reports from key U.S. companies, including Amazon, Microsoft, and Alphabet—part of the Magnificent Seven—as well as South Korean chipmakers SK Hynix and Samsung, are set to be released. Recent results from Tesla and Meta have heightened concerns about spending and contributed to a decline in stock prices. Stephen Innes from SPI Asset Management noted the critical nature of this earnings season, stating, "Investors want proof now. They want to know whether the billions going into the compute buildout are building a durable earnings machine or just a shinier version of the same old capex furnace."
Following a weak performance on Wall Street on Friday, where all three main indexes closed lower, Asian exchanges also experienced declines at the start of the week. Seoul, often viewed as a gauge for the AI sector, fell by more than one percent, with additional losses reported in Tokyo, Shanghai, Hong Kong, Sydney, Singapore, and Manila. Meanwhile, oil prices fell over one percent after climbing more than three percent on Friday, driven by supply concerns linked to the Middle East and Ukraine conflicts as winter approaches.
Speculation regarding potential actions from Donald Trump against Iran has intensified ahead of Tuesday's elections, with some officials warning that the period leading to the new Congress could be particularly perilous. Trump's comments to Fox News on Sunday indicated a critical decision ahead: "I have a decision to make: Do I finish it off, which would be very easy to do, or do I make a deal? That's all."