Japan's Nikkei falls as AI doubts, bond stress weigh

Japan's Nikkei 225 experienced a sharp decline on Friday due to concerns surrounding the artificial intelligence sector and stress in global bond markets. The index fell 1.06% to 68,308.92 in early trading, indicating a possible weekly drop. The broader Topix also saw a slight decrease of 0.24% to 4,081.62.

US equity indexes had already taken a hit the previous evening, mainly due to technology companies reacting negatively to a report from The Financial Times. According to the report, OpenAI's annualized revenue was significantly lower than what the company had previously claimed.

Euro zone borrowing costs remained elevated, as a surge in oil prices exacerbated inflation concerns. Additionally, there were lingering worries about France's budgetary situation. According to Sony Financial Group analysts, the revelation that a major unlisted AI company's revenue fell short of its own forecasts sparked a domino effect of selling off related stocks. The analysts also pointed out that the sharp increase in crude oil prices seemed to have had an impact on the market.

Data released on Friday revealed that Japan's household spending in August decreased by 3.1% year-on-year, indicating cautious consumer sentiment and ongoing inflation pressures. On Thursday, the Bank of Japan noted that cost-driven price increases were spreading to consumer goods, suggesting a high likelihood of further interest rate hikes throughout the year.

On the Nikkei 225, there were 112 advancers, outnumbering the 110 decliners, with 3 stocks remaining unchanged. SoftBank Group, a major investor in OpenAI, was the biggest loser, dropping 5.40%. Other significant decliners included Furukawa Electric, which declined 4.83%, and Murata Manufacturing, which fell 4.68%. Conversely, Nomura Research Institute emerged as the top gainer, up 5.13%, followed by Baycurrent, which increased by 3.97%, and Shift, which rose 3.92%.