Oil’s jump past $90 and a critical earnings week have pushed Asian investors into cautious mode, raising stakes for AI and chip stocks.
Asian stock markets on Monday traded cautiously as oil prices rose amid the escalation of the regional conflict, while a busy week of earnings reports from leading companies is putting pressure on investors’ expectations for artificial intelligence and chips.
Brent rose above $90 a barrel, jumping about 3% after the United States began its ninth day of armed strikes on Iran, which replied with attacks on targets in the region.
Rising fuel costs rekindled concerns about inflation, while US consumer price data for the prior period came in below expectations, prompting futures markets to bake in a probability of a Fed rate hike of around 29 basis points by year-end.
Our forecast is that the Fed’s rate steps toward hikes in 2027 will be more modest, but the balance of risks tilts toward an earlier increase than expected,
– Bruce Kasman, JPMorgan’s chief economist
Futures priced in roughly a 60% chance of a move as early as September, but reaching the 5.0% level on the 30-year Treasuries could push stocks toward safer assets and shape future expectations for high corporate valuations.
This is happening against a backdrop of growing concerns about inflated valuations in chip and AI stocks, as the Philadelphia Semiconductor Index fell about 10% last week and remained roughly 20% below the June high.
An additional blow to markets came from the news landscape: Chinese AI company Moonshot unveiled a new open-weighted model Kimi K3, which, according to the company, demonstrates performance close to Anthropic’s Fable.
The focus remains on this week’s earnings schedules: Alphabet, Intel, and Tesla are due to report their results, which will add to market nervousness as investors await confirmation or denial of forecasts for earnings growth in technology and AI sectors.
HIGH EXPECTATIONS FOR EARNINGS REPORTS
Bank of America analyst Savita Subramanian remains confident in a positive earnings scenario, expecting to beat consensus by roughly 5% or to rise about 28% versus expectations. The tech sector is expected to lead the growth, and the semiconductors segment could see double-digit gains.
Such expectations are supported by European and U.S. futures: S&P 500 futures rose about 0.2%, Nasdaq futures about 0.4%. In Europe, EUROSTOXX 50 and DAX futures gained around 0.2%, while the FTSE was almost flat.
The Japanese Nikkei index was closed for a holiday, while the MSCI Asia-Pacific (ex-Japan) fell about 0.3%. The South Korea market, where chips carry substantial weight, declined 0.6% after a sharp drop of nearly 9% last week due to retail investor pressure on leveraged positions.
The outlook for monetary policy remains important: the European Central Bank will meet in a few days, and expectations remain for keeping rates at 2.25% with prospects for further hikes in the next period. Markets have almost fully priced in a September rate increase and a further rise to 2.75% by early next year.
The euro remained around $1.1433 to the dollar, while the dollar steadied near 162.41 yen, signaling potential intervention by Japanese authorities if the yen weakens significantly.
In the commodity market, rising yields weighed on gold, which fell roughly 0.6% and was trading around $3,993 an ounce.
Overall, investors remain cautious and await further moves as earnings and macro data will shape the direction of global markets in the coming days.