Asian stocks dive as focus on earnings, geopolitics

Asian equities experienced a sharp decline on Tuesday, primarily driven by technology shares, as geopolitical tensions in the Middle East continued to fuel oil price volatility. Brent crude futures reached US$105.9 per barrel, nearing a two-week high, putting pressure on yields and affecting the performance of growth stocks. The MSCI's Asia Pacific index outside Japan fell by 2%, with South Korea's KOSPI dropping 6%, and Japan's Nikkei sinking 2.6% after returning from a holiday.

The tech sector's selloff on Wall Street also impacted Asian markets, as investors worried about the sustainability of AI stock rally amidst increased competition between the US and China. The renewed focus on geopolitics, particularly the fragile truce in Russia-Ukraine and ongoing attacks on Saudi Arabia, added to the risk-off sentiment in Asia.

The caution was further reinforced by the anticipation of US bank earnings, which investors would scrutinize to gauge the impact of rising Treasury yields on lending, funding costs, and overall dealmaking.