Asian Stocks Eye Rebound as US Selloff Extends: Markets Wrap

(Bloomberg) — Asian stocks were mainly set for a positive open, even as Wall Street’s selloff deepened amid mounting concerns over lofty valuations in the artificial intelligence sector.

Equity-index futures pointed to gains in Japan and Hong Kong following three days of losses for both benchmarks, and a small decline for Australia. The S&P 500 index fell for a fourth day, the longest losing streak since August. A basket of the Magnificent Seven companies declined 1.8%. Nvidia Corp., at the center of the AI frenzy, slumped 2.8% ahead of its earnings report after Wednesday’s close.

Bitcoin climbed after briefly dropping below $90,000. The yield on 10-year Treasuries slid three basis points to 4.11%. The dollar wavered.

Wall Street has grown increasingly concerned that AI isn’t yet generating enough revenue or profits to justify the massive spending on infrastructure. Microsoft Corp. and Nvidia are committing to invest up to a combined $15 billion in Anthropic PBC, in a move that ties the AI developer closer to two of the biggest backers for its rival OpenAI.

“The question isn’t really whether we’re in a bubble,” said Sonu Varghese at Carson Group. “The real question is how long the current trend in AI spending will last and how bad the fallout will be when it ends.”

The S&P 500 is down more than 3% this month, on pace for its worst November since 2008. Volatility has roared back. Wall Street’s so-called fear gauge, the Cboe Volatility Index, topped 24 — above the key 20 level that causes concern for traders — and reached its highest in a month.

Also high on the list of worries are whether the Federal Reserve will cut interest rates next month. Traders have less conviction about another reduction in borrowing costs, with swaps now implying a less-than-50% likelihood of a December move. Several policymakers have recently cautioned against one, citing the risk of inflation, although Fed Governor Christopher Waller repeated his view in favor of lowering rates.

Treasuries are on course for their first back-to-back gains of the month, edging higher amid the selloff in stocks and fresh signs of weakness in the US labor market.

Jobless claims totaled 232,000 in the week ended Oct. 18, according to the Labor Department website showing historical data for claims. Companies shed 2,500 jobs per week on average in the four weeks ended Nov. 1, according to ADP Research.

The ADP snapshot of the labor market has helped bridge the gap with official employment data delayed by the longest government shutdown in history. While funding to official statistics agencies has been restored, it’s still unclear when October economic data will be issued.

“The stock market has started to doubt the Fed’s ability to cut rates in December, so should Thursday’s jobs report come in weaker than expected, it may clear the path for the Fed to cut in December and fuel the Santa Claus rally we anticipate, which could push the S&P 500 to 7,100 by year-end,” said James Demmert at Main Street Research.

Nvidia Reports

Nvidia, on a standalone basis, has grown larger than the energy, materials, and real-estate sectors combined and depending on the day, it even exceeds the combined weight including the utilities sector, according to Ryan Grabinski at Strategas. It’s also bigger than the entire industrials sector.

“The outcome is likely to send ripple effects through both US and international markets,” Grabinski said. “Although expectations for AI more broadly have cooled in recent weeks, this report has the potential to shift sentiment back to optimism. That said, the bar is undeniably high right now.”

Following Nvidia’s results, traders will then focus on the September US jobs report, scheduled to be released on Thursday after a lengthy delay.

In commodities, oil rose as hawkish rhetoric by the European Union’s top diplomat raised expectations that sanctions on Russia will tighten. Meanwhile, gold wavered.

Some of the main moves in markets:

Stocks

Hang Seng futures rose 0.5% as of 7:32 a.m. Tokyo time S&P/ASX 200 futures fell 0.2% Nikkei 225 futures rose 0.8% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1580 The Japanese yen was little changed at 155.48 per dollar The offshore yuan was little changed at 7.1116 per dollar The Australian dollar was little changed at $0.6506 Cryptocurrencies

Bitcoin rose 0.9% to $93,271.57 Ether rose 0.9% to $3,124.01 Bonds

The yield on 10-year Treasuries declined three basis points to 4.11% Australia’s 10-year yield was little changed at 4.44% This story was produced with the assistance of Bloomberg Automation.

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