US Futures, Korean Stocks Drop as AI Mania Fades: Markets Wrap

(Bloomberg) — Asian stocks declined along with US equity-index futures as enthusiasm for the artificial intelligence trade cooled after driving markets to record highs this year.

MSCI’s regional equity gauge dropped 1.3%, with South Korea — the world’s best-performing gauge this year and a bellwether for AI investments — slipping 4.4%. Futures contracts for the Nasdaq 100 Index dropped 1.1%, indicating a third day of losses for the gauge as investors rotate out of tech and chip stocks.

Currencies remained a focus with the Korean won extending its drop to a new 2009 low. The Indonesian rupiah closed Thursday at its lowest ever against the dollar as foreign investors pull billions of dollars from the country’s bonds and stocks fell.

Stocks are pulling back from record highs as Broadcom Inc.’s outlook for AI-chip sales fell short of elevated expectations, pausing a blistering advance in semiconductor shares from their war-driven lows. Investors now face a crucial test on Friday with the US jobs report, which could reshape expectations for Federal Reserve policy and determine whether the AI-fueled rally broadens further or loses momentum.

“The rally off the March lows has been an extremely strong one. In fact, it has been parabolic, especially for the chip stocks,” said Matt Maley at Miller Tabak. “Therefore, if the earnings report from Broadcom is the catalyst for a pullback that lasts more than a day or two, it would actually be healthy for the stock market.”

Broadcom shares slid 13% Thursday — the most in more than 16 months — after the company delivered a disappointing forecast for AI chip revenue. While Broadcom had been making progress in pivoting to AI customers, it has come up against outsized investor expectations.

Sentiment toward the chip sector remained weak with the Philadelphia Semiconductor Index dropping 2.1%. A Bloomberg gauge of semiconductors in Asia Pacific declined 2.7%. South Korean chipmakers Samsung Electronics Co. and SK Hynix Inc. both fell at least 4% in Seoul trading.

What Bloomberg’s Strategists Say…

The slump in South Korean shares is weighing down the global risk mood as the flipside of the Kospi’s impressive rise to prominence plays out. While the retreat in Seoul may have plenty of idiosyncratic drivers, that’s likely to be little help for investors elsewhere because South Korea’s sway over global markets surged this year along with the rally that briefly took it past India as the world’s sixth-largest bourse.

— Garfield Reynolds, Markets Live team leader. For more on the analysis, click, here.

In other corners of the market, Brent steadied around $95 a barrel. Crude fell Thursday as investors bet the US and Iran were moving closer to a diplomatic breakthrough following a conditional ceasefire between Israel and Lebanon.

Gold was little changed as uncertainty persisted over progress in US-Iran talks to end the war that’s roiled global markets. The yellow metal traded near $4,470 an ounce.

Meanwhile, President Donald Trump said ceasefire talks are in the “final” stages. Earlier, Iran’s foreign minister said the negotiations had stalled. On Wednesday, Iran fired missiles and drones at Kuwait and Bahrain, killing one person and injuring dozens at Kuwait’s main airport, after the US struck an oil tanker headed to the Islamic Republic.

In Lebanon, Hezbollah militants said they refused to abide by the conditions of a ceasefire announced by the US State Department only hours before.

The key for traders on Friday will be the monthly US employment numbers. Treasury bond traders, having bought into the prediction that the Fed will raise interest rates during the next 12 months, stand to pay a heavy price if US employment data for May are weak.

The May data is slated to be released at 8:30 a.m. in Washington. It’s expected to show an 85,000 increase in nonfarm payrolls, a three-month low, and an unchanged 4.3% unemployment rate, the median estimates of economists in a Bloomberg poll show.

While the US-Iran conflict and AI continue to dominate the market narrative, Friday’s jobs report is very important for markets, said Tom Essaye of the Sevens Report.

“A ‘too tight’ labor market would risk increasing the chances of Fed rate hikes sooner than expected,” he said.

Corporate Highlights:

SpaceX set out its IPO pitch to retail investors early on Thursday with a video in which Chief Financial Officer Bret Johnsen joins the dots between the company’s rocket, satellite and AI businesses. Blackstone Inc. limited redemptions from its flagship private credit fund for the first time after investors sought to pull 10% of the shares, the latest firm to cap withdrawals amid a continued investor exodus. S&P Dow Jones Indices will keep its existing eligibility requirements for main benchmarks like the S&P 500 Index, rejecting proposals that would have made it faster for mega-cap companies such as Elon Musk’s SpaceX to gain rapid entry into the benchmark after going public. Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.6% as of 10:52 a.m. Tokyo time Japan’s Topix fell 0.1% Australia’s S&P/ASX 200 fell 0.7% Hong Kong’s Hang Seng fell 0.4% The Shanghai Composite was little changed Euro Stoxx 50 futures were little changed Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1614 The Japanese yen was little changed at 159.95 per dollar The offshore yuan was little changed at 6.7771 per dollar Cryptocurrencies

Bitcoin fell 0.5% to $63,265.97 Ether fell 1.1% to $1,753.13 Bonds

The yield on 10-year Treasuries was little changed at 4.47% Japan’s 10-year yield was unchanged at 2.660% Australia’s 10-year yield declined one basis point to 4.90% Commodities

West Texas Intermediate crude was little changed Spot gold fell 0.7% to $4,445.28 an ounce This story was produced with the assistance of Bloomberg Automation.

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