Asia shares bend under AI stress; Apple earnings loom

Asian share markets experienced a decline on Monday as fears about the sustainability of the artificial intelligence (AI) investment boom arose, overshadowing the tech sector. The high price of oil diminished the safe-haven appeal of sovereign bonds. Concerns over negative cash flow and the size of AI capital expenditures led to an increase in the cost of insuring against corporate defaults last week.

Gold plummeted to a one-year low due to investors selling to meet margin calls. Midterm elections in the United States may introduce additional political obstacles for data centers, exacerbating market unease. Binance, the world's largest cryptocurrency exchange, resumed operations on Sunday after hackers stole billions from the platform the previous week, prompting withdrawals.

Analysts at Goldman Sachs anticipate hyperscalers' capital expenditures to nearly double to US$800 billion in 2025 and further rise to US$1.2 trillion by 2027. Despite this, they expect S&P 500 earnings per share growth to reach nearly 30% in 2026, slowing to 18% in the following year. Goldman Sachs' chief US equity strategist, Ben Snider, highlighted that while AI investment spending will continue to grow, the rate of capital expenditures is reaching its peak.

Japan's Nikkei fell 0.5%, while South Korea declined 0.8%, having dropped 16% in the previous month. The MSCI's broadest Asia-Pacific index outside Japan decreased by 0.4%. In Europe, EUROSTOXX 50 futures rose marginally by 0.1%, while DAX futures remained unchanged. On Wall Street, S&P 500 futures edged up by 0.4%, and Nasdaq futures climbed 0.6%.

The tech-dominated Nasdaq faced its worst monthly decline since the April 2025 tariff dispute, losing nearly 7% in October. Safe-haven bonds experienced a brief respite from the market retreat, with investors uncertain if a prolonged stock market sell-off could prevent the Federal Reserve from raising interest rates in December.

Yields on 10-year Treasuries rose to 4.952%, but still remained far below their October peak of 5.3645%. Two-year yields stood at 4.612%. Central banks meeting this week anticipate hikes from the Reserve Bank of Australia, Bank of England, and Riksbank, while the Norges Bank is not expected to hike rates. Economic data released this week includes the influential US ISM manufacturing survey for October and the crucial payrolls report on Friday, with median forecasts predicting a 65,000 increase in jobs, following a disappointing 29,000 gain in September.