Asian stocks slip, Wall Street and bonds benefit from oil dip

Asian share markets experienced a decline on Monday (Oct 19) due to concerns over the substantial funding requirements for artificial intelligence (AI) technology. This unease overshadowed a week filled with corporate earnings reports, while positive economic data from China provided a glimmer of support for global growth. A decrease in oil prices contributed to the bond and Wall Street stock futures, helping to curb the extent of Asia's losses.

Oil prices dropped following US President Donald Trump's decision to waive some sanctions on Russia, although he later indicated that a final decision had not been made. US Secretary of State Marco Rubio stated that the president would take up to 60 days to evaluate the economic consequences of this move. Despite the fall in oil prices, Brent futures saw a decrease of 1.8 percent to $107.83 a barrel, and US crude futures dropped 1.2 percent to $100.20 a barrel.

Geopolitical tensions and safe-haven flows in equities fueled a rally in sovereign bonds, with 10-year Treasury yields falling 4 basis points to 5.0525 percent, recording their largest weekly decline in over eight months. Asian markets faced challenges stemming from worries about tech, with Japan's Nikkei dropping 0.7 percent, following a 5.4 percent loss the previous week.

South Korea rose by 0.6 percent, recovering from a decline of over 14 percent the prior week, while Taiwan fell 1.1 percent. MSCI's broadest index of Asia-Pacific shares outside Japan decreased by 0.2 percent. My Bui, an economist at fund manager AMP, highlighted investor concerns about AI revenues not being sufficient to recover massive upfront investments, as well as the potential need to write down AI infrastructure due to aging and depreciation. This would lead to significant reductions in book value.