Asian Share Markets Decline Amid AI Stress and Looming Apple Earnings
Market Overview and Key Economic Factors
By Wayne Cole
SYDNEY, Nov 2 (Reuters) - Asian share markets slipped on Monday as worries about the sustainability of the AI investment boom loomed over the tech sector, while the high price of oil limited the safe-haven appeal of sovereign bonds.
AI Investment Boom and Market Reactions
Concerns about negative cash flow and the sheer scale of AI capex saw the cost of insuring against corporate defaults blow out last week, while gold hit a one-year low amid talk stressed investors were selling to raise money for margin calls.
Political and Regulatory Uncertainties
An added wrinkle is the midterm elections in the United States, where a win by Democrats in either or both houses could result in more political hurdles for data centres.
Cryptocurrency Market Volatility
Adding to the air of unease were withdrawals from Binance as the world's biggest cryptocurrency exchange went back online on Sunday after hackers stole billions from the platform last week.
Corporate Earnings and Analyst Expectations
All of which raises the stakes for earnings this week with Apple, AMD and Palantir set to report in the wake of Intel's near 29% tumble on Friday.
Hyperscaler Capex and EPS Growth Forecasts
Analysts at Goldman Sachs expect capex by hyperscalers to almost double to $800 billion this year, and rise further to $1.2 trillion in 2027. At the same time, they see S&P 500 EPS growth of nearly 30% in 2026, slowing to 18% next year.
Challenges for Equity Investors
"Earnings results have underscored the fundamental challenge facing equity investors - earnings growth is strong, but it is no longer accelerating," wrote Ben Snider, Goldman's chief US equity strategist, in a note.
"Similarly, Q3 results support our view that AI investment spending will continue to grow but that the growth rate of AI capex is peaking."
Regional Market Performance
Japan's Nikkei fell 0.5%, while South Korea lost 0.8%, having shed 16% last month. MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.4%.
In Europe, EUROSTOXX 50 futures firmed 0.1%, while DAX futures were flat.
Interest Rates and Central Bank Actions
More Rate Hikes Coming
On Wall Street, S&P 500 futures edged up 0.4%, while Nasdaq futures bounced 0.6%. The tech-heavy Nasdaq lost almost 7% in October for its worst month since the Liberation Day tariff rout of April 2025.
The retreat in equities provided a reprieve to safe-haven bonds, with investors wondering if a sustained selloff in the stock market could deter the Federal Reserve from hiking interest rates in December.
Futures still imply a 72% chance of a quarter-point rate rise, but now only have 55 basis points of total tightening priced in compared to more than 70 basis points a month ago.
Yields on 10-year Treasuries nudged up to 4.952%, but remained well off their October peak of 5.3645%, while 2-year yields stood at 4.612%.
Among central banks meeting this week, markets are wagering on hikes from the Reserve Bank of Australia, Bank of England and Riksbank, while the Norges Bank is seen on hold.
Upcoming Economic Data and Currency Movements
Economic data due this week includes the influential US ISM survey of manufacturing for October later Monday, while the all-important payrolls report is on Friday.
Median forecasts are for a 65,000 rise in jobs, after September's disappointing 29,000 gain, with the unemployment rate holding at 4.2%.
In currency markets, the majors were pretty much sidelined while all the action was concentrated in stocks. The euro was flat at $1.1156, while the dollar was barely changed at 157.62 yen.
Commodities Update
For commodities, oil prices slipped after Iranian and Qatari officials held a third straight day of talks aimed at pushing for a deal to end the US-Israeli war on Iran.
Brent futures dipped 1.5% to $111.72 a barrel, though that follows a 13.6% jump in October, while US crude futures eased 1.7% to $102.37 a barrel. [O/R]
Non-interest-bearing gold bounced 0.6% to $3,898 an ounce, having fallen 6.8% last month. [GOL/]
(Reporting by Wayne Cole;Editing by Shri Navaratnam)
