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

On October 29, Asian stocks suffered as Alphabet's earnings fell short, dragging Wall Street futures downward. After-hours trading saw Alphabet's shares plummet by 10%, erasing nearly US$400 billion (S$512 billion) in market value. This marked a significant decline of nearly 4% in Samsung Electronics' shares, which wiped over 2.6% from the KOSPI index.

MSCI's broad Asia-Pacific index excluding Japan fell 0.7%, while Japan's Nikkei pared gains to be up only 0.3%. China's major companies declined by 0.9%, while Hong Kong's Hang Seng index rose 0.2%.

Jamie Hannah, deputy head of investments at VanEck, noted that Alphabet's traditional ad revenue has been affected by the AI boom, while Microsoft's better-than-expected cash flows boosted its shares by 3%. The Federal Reserve held interest rates steady as expected, but two committee members voted for a hike. Chairman Kevin Warsh expressed a more optimistic outlook on inflation, causing a rally in Treasuries. However, the main challenge now lies in the earnings reports due later, particularly from Amazon and Intel.

SK Hynix's shares rose 1.3% after surging 11% the previous day on solid earnings. Investors are closely monitoring the upcoming US Personal Consumption Expenditures data for September, which serves as a key gauge of inflation. Market participants are still pricing in an 80% chance of a rate increase in December, despite Warsh's more dovish comments.

This has steepened the Treasury yield curve, with the two-year yield falling 6 basis points overnight and now sitting at 4.6933%. The dissenting votes to raise rates at today's meeting may indicate a focus on when, rather than whether, the Fed will hike rates again. Meanwhile, the Bank of Canada increased interest rates for the first time in over three years, signaling further possible hikes.

The European Central Bank is expected to keep rates steady later on October 29. The US dollar remained relatively stable against major currencies after a slight overnight decline, while the New Zealand dollar suffered heavy losses at $0.5626, down 1% following the central bank's decision to hold rates steady. Additionally, the price of Brent crude futures dropped 0.4% to $114.91 a barrel following reports that US Vice-President JD Vance reached out to Iran's Security Council chief in an attempt to revive peace negotiations.