Asian stocks steady as AI, Middle East jitters recede

Asian markets and US equity futures started the week on a steady note, recovering from a turbulent previous week. Tech-heavy markets in Asia saw some of their steepest declines in years due to concerns over demand for computer chips. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.8%, after dropping 4.6% last week.

Japan's Nikkei index added 2.5%, while South Korean shares gained modestly. Taiwan's benchmark index even saw a substantial rise of about 2.5% following its biggest weekly drop in two decades, triggered by fears about AI profitability and infrastructure demand following Democrats' wins in US midterm polls.

The AI-related selling, which intensified after US midterm elections, further added to market jitters. Wall Street equities rallied on Friday, providing some relief to investors after the chaotic week. Earnings reports from tech companies, including CoreWeave, Applied Materials, and Cisco Systems, are expected in the coming week, which could test the profitability of AI ambitions amid the high costs of build-out.

Nvidia's internal investigation into CEO Jensen Huang's relationship with an alleged Chinese spy could also contribute to market volatility.

Despite the recent setback, markets are not out of the woods yet, according to Kyle Rodda, senior financial market analyst at Capital.com. The recent mid-term elections have increased regulatory risks, and an underwhelming earnings season, with Magnificent Seven companies missing earnings expectations, has left the momentum skewed to the downside.

Brent crude prices fell to $97.49 per barrel after US President Donald Trump expressed his skepticism about ordering fresh attacks on Iran as long as talks to end the conflict progress. The Federal Reserve's interest rate hike bets, supported by a blowout jobs report showing US employers added 165,000 jobs last month, further boosted the dollar.

Fed hike expectations moved up to nearly 80% in the wake of the report. A US CPI reading on Tuesday could further solidify these expectations for a hike next month. The dollar index touched 102.2, with the euro, yen, and Bitcoin experiencing minor declines in the same timeframe.