Market Sentiment Dips as Caution Prevails Ahead of Earnings Reports

A look at the day ahead in European and global markets from Rae Wee

It was another sea of red in Asia markets on Tuesday, with the sombre mood set to extend into Europe, as investors braced for earnings from artificial intelligence darling Nvidia and a long-awaited U.S. jobs report later this week.

Market sentiment heading into the releases has been fragile, with the bar high for Nvidia to deliver a set of results that will knock the lights out and justify the massive spending companies are pouring into all things AI.

With its AI chips, the semiconductor giant has been a bellwether for the theme that has lifted shares of an array of technology names as well as other companies involved in the vast infrastructure expansion to support AI use.

But the sector continues to be jolted by fears of a bubble, drawing comparisons with the 1990s dotcom boom and bust.

The latest sign of unease came after a regulatory filing showed tech billionaire Peter Thiel's hedge fund sold off its entire stake in Nvidia.

Just last week, Japan's SoftBank Group said it had sold all the 32.1 million Nvidia shares it held in October to bankroll CEO Masayoshi Son's sweeping AI push.

Elsewhere, the focus is on Japan, where Prime Minister Sanae Takaichi is set to meet Bank of Japan Governor Kazuo Ueda later in the day.

Traders have been on alert to the threat of intervention from Japanese authorities as the yen keeps sliding to multi-month lows and past 155 per dollar, close to the levels that prompted a currency intervention last year.

Japanese Finance Minister Satsuki Katayama said on Tuesday she was "alarmed" by the "one-sided, rapid moves" in the foreign exchange market.

But their jawboning efforts this time are struggling for traction, undermined by Takaichi's promotion of advocates of big fiscal and monetary stimulus to key posts.

Japan is considering spending around 17 trillion yen ($110 billion) in Takaichi's first stimulus package, the Nikkei newspaper reported on Saturday.

Super-long Japanese government bonds (JGBs) have been hammered this week as concerns deepen over the country's increasingly expansionary fiscal stance, with the yield on the 20-year JGB rising to its highest since July 1999 on Tuesday.

Key developments that could influence markets on Tuesday:

- Fed's Barr, Barkin, Logan speak

- U.S. factory orders (August)

(Reporting by Rae Wee; Editing by Sonali Paul)