Asian shares fall as Alphabet earnings miss drags Wall St futures lower

Asian shares experienced a reversal of earlier gains on Thursday, as AI-related earnings reports produced diverse outcomes, heightening the pressure for forthcoming reports from Amazon and Intel. Alphabet's shares plummeted by 10% in extended trading, erasing nearly $400 billion in market value. This decline contributed to a 1% drop in Nasdaq futures.

Conversely, Microsoft surpassed expectations with cash flows exceeding forecasts, boosting its shares by 3%. The U.S. Federal Reserve maintained interest rates as anticipated, although two committee members advocated for an increase. Chair Kevin Warsh expressed optimism regarding inflation prospects during his post-meeting press conference, resulting in a rally in Treasuries.

However, the real test lay in the earnings announcements. Samsung Electronics reported its operating profit surged nearly ninefold to a record in the third quarter, fueled by strong demand for AI chips; nevertheless, its shares declined over 4%, causing the KOSPI index to fall 2.6% after a 7% surge the previous day. MSCI's comprehensive Asia-Pacific index outside Japan declined 0.7%, while Japan's Nikkei saw a minor gain of 0.3%.

Shares of Mainland China's blue chips slipped 0.9%, while Hong Kong's Hang Seng index rose 0.2%. Jamie Hannah, deputy head of investments at VanEck, attributed Alphabet's decline to the adverse impact of the AI boom on its traditional advertising revenue. Oil prices declined amid hopes for peace and concerns about escalating tensions in the Middle East.

Alphabet and Microsoft both affirmed that AI revenue generation remained robust, driven by data center growth and cloud services. SK Hynix's shares climbed 1.3% following a strong earnings report, up from 11% the previous day. The Federal Reserve's decision to maintain interest rates led market participants to focus on the U.S. Personal Consumption Expenditures data for September, viewed as the primary indicator of inflation.

Forecasts anticipate a 0.3% monthly increase in the core inflation measure, up from a 0.2% gain in the prior month. While markets are 80% confident of a rate hike in December, dissenting votes during the Fed meeting could imply that tightening may occur later, leaving yields within a tight range unless there's a clear signal for further tightening or a shift towards cuts.

The Bank of Canada raised interest rates for the first time in over three years and cautioned of additional increases. The European Central Bank is expected to keep rates unchanged later on Thursday. The U.S. dollar remained stable against major currencies after a slight decline overnight, while the New Zealand dollar suffered significant losses, falling to $0.5626 after its central bank chose to hold rates steady.

Brent crude futures dipped 0.4% to $114.91 a barrel following reports that Vice President JD Vance had sent a letter to Iranian Security Council chief Mohsen Rezaei in an attempt to revive peace negotiations.