Asian stocks fall after US losses, oil holds drop: Markets Wrap

Asian stocks experienced a decline after a selloff in US chipmakers intensified, despite a drop in oil prices following positive developments in Iran's diplomatic efforts to end the war. The MSCI Asia Pacific index fell by 0.6%, with the South Korean Kospi Index dropping over 2%. This decline followed a 12% drop for US chipmakers and a 10% decline in the Nasdaq 100 from its peak.

While some investors appeared to take advantage of the dip, with US stock futures gaining, Japanese markets were closed for a holiday. Chinese equities also fell, even after the central bank encouraged financial institutions to use stock-support tools. Brent crude prices slipped by 0.2% to $104.61 a barrel, after falling 7.6% on Monday, as the US and Iran signaled a willingness to pursue peace talks. The ongoing war and US midterm elections continued to weigh on market sentiment.

Geopolitical tensions are keeping the market on edge, even as easing tensions lower energy prices and inflation risks. However, the drop in crude has not yet revived interest in technology shares, as concerns over AI spending and stretched valuations persist. Dave Mazza, CEO of Roundhill Financial, noted that the lack of conviction in the market is evident, despite last week's significant losses.

Korea's Kospi Index led declines in Asia, as chip giants Samsung Electronics and SK Hynix dragged the market down. Hebe Chen, a market analyst at Vantage Global Prime, explained that Korea's semiconductor-heavy market is once again at the forefront of the global AI trade's revaluation. The divergence in Wall Street, where tech heavyweights are losing ground while broader market breadth improves, indicates that investors are rotating away from crowded AI trades, rather than abandoning equities altogether.

Apple Inc. saw its shares fall in late US trading after the company presented a mixed outlook in its first quarterly report under CEO John Ternus. The narrower profit margins overshadowed an upbeat sales forecast. Anthropic PBC announced a twelve-fold increase in quarterly revenue, but the company also disclosed plans to spend over $895 billion in the coming years.

Chinese markets were dragged down by skepticism over the latest market support measures from authorities. The CSI 300 Index dropped 0.1%, as the two liquidity-injection tools - a swap facility and relending operations - were reintroduced with some adjustments. Chinese shares have been in a slump since the summer, impacted by a weak economy and doubts about AI earnings.

The Bloomberg dollar index remained unchanged on Tuesday, while US Treasury 10-year futures slipped 5/32. There was no trading of cash Treasuries in Asia due to the holiday in Japan. US manufacturing activity picked up in October, driven by the strongest increase in production in nearly five years, while labor-market reports are expected to provide further insight into the economic outlook.

US job openings data are due on Tuesday and are expected to show a rise in September, with weekly jobless claims remaining near historically low levels. Economists anticipate that the payrolls report on Friday will show job growth more than double to 65,000 in October, with the unemployment rate holding steady at 4.2%. Matt Maley, a market commentator at Miller Tabak, believes that political and geopolitical issues, along with growing doubts about AI investment returns, will be key factors in determining the market's direction in the coming week.