Asian shares tumble, oil rises as markets await AI sector results

Asian stock markets fell on Tuesday as geopolitical concerns and the prospect of key AI sector results weighed on investor sentiment. Oil prices climbed as markets digested a US executive order waiving certain sanctions and tariffs on Russian energy. The dollar remained stable against the euro, which benefited from heightened demand for safe-haven assets amid recent riots in France.

Investors are now eagerly awaiting earnings reports from major AI companies, including Meta, Tesla, and chipmakers Lam Research and Texas Instruments. The broader market appears willing to cover short positions and exit defensive trades, but analysts caution that this does not equate to confidence in rebuilding aggressive exposure to the AI sector.

The MSCI Asia ex-Japan index slipped 0.93%, while Japan's Nikkei 225 dropped 1.28%. South Korea's KOSPI declined 3.61%. The dollar index edged down 0.05% to 101.92, while the euro gained 0.06% to $1.12. Meta, among five AI hyperscalers, is projected to increase combined capital expenditures to approximately $1.2 trillion next year, according to Goldman Sachs.

Other tech-heavy sectors are also expected to deliver robust earnings growth, with estimates suggesting a doubling of global earnings compared to the same quarter last year. However, not all AI-related investments have been successful; shares of South Korean AI infrastructure firm Elice Group opened 16% lower than their IPO price following a $151.12 million market debut.

Meanwhile, Brent crude oil prices rose 0.21% to $109.78 a barrel, and US West Texas Intermediate gained 0.15% to $103.82 a barrel. Despite this, spot gold slipped 0.51% to $4,118.71 an ounce. Federal Reserve officials have signaled a cautious approach to rate hikes, with Fed Chair Kevin Warsh expressing optimism about US economic strength without committing to a specific timeline for further increases.

European policymakers are also set to provide insights later in the week, including a speech by ECB member Martin Kocher and Finnish central bank governor Olli Rehn.