AI-linked Asian stocks slump on calls to slow development; Fed, BOJ hikes loom

Asian stock markets plunged on Monday (Sep 14) as AI-linked shares faced additional pressure following calls for a slowdown in development to mitigate risks and safeguard humanity. The leaders of AI companies OpenAI and Anthropic highlighted the need for caution in advancing their technologies. Simultaneously, supply disruptions in the Middle East sent oil prices surging, with Brent crude climbing nearly 3% following strikes on Saudi Arabia and attacks on ships in the Gulf.

These developments threatened global energy supplies and fueled concerns about prolonged elevated oil prices, potentially contributing to global inflation.

In the United States, the Federal Reserve and the Bank of Japan signaled potential interest rate hikes this week, further weighing on investor sentiment. Michael Feroli, chief US economist at JPMorgan, expects the Fed to raise rates by 25 basis points on Wednesday and again in December, marking the first increase since mid-2023. Feroli noted that failing to follow through on rate hikes could undermine the credibility of the institution. Analysts forecast an 86% probability of a Fed rate increase in September and December.

Meanwhile, MSCI's Asia-Pacific index excluding Japan declined 1.1%, while Chinese blue chips slipped 0.5%. Europe saw a slight dip in the Eurostoxx 50 futures (-0.4%) and a modest drop in the DAX (-0.2%). On Wall Street, the S&P 500 futures fell 0.5%, and the Nasdaq futures slipped 1.3%. Treasury yields remained relatively stable, with 10-year yields up 19 basis points as the yield curve flattened.

The Bank of Japan was expected to hike its policy rate by 0.25% during a meeting on Friday, signaling a potential shift in monetary policy.