Asian equities fell as investors questioned whether soaring artificial intelligence investment can deliver adequate returns, with major technology earnings due this week and political tensions weighing on the euro.
Asian markets fell on Monday as worries about the scale of spending on artificial intelligence weighed on sentiment ahead of a heavy week of corporate results, while the euro softened amid unrest in France.
A drop in oil prices helped steady bond markets and US equity futures, limiting losses in Asia. Brent crude fell after US President Donald Trump moved to ease some sanctions pressure on Russia, though he later said no final decision had been taken. US Secretary of State Marco Rubio said on Saturday that Trump would take up to 60 days to judge the economic impact of any such step. Brent futures were down 1.6% at $108.06 a barrel, while US crude slipped 0.7% to $100.70.
That weaker oil backdrop also fed a broader move into government debt. Geopolitical tension and a shift towards safer assets pushed sovereign bonds higher, with the yield on 10-year US Treasuries down three basis points at 5.0645%, after its biggest weekly fall in more than eight months. US stock futures edged higher, with the S&P 500 up 0.5% and the Nasdaq 0.8%, but traders remained cautious about the durability of the recent rally in technology shares.
The pressure was most visible in Asia’s tech-heavy markets. Japan’s Nikkei fell 2% after dropping 5.4% last week, while South Korea’s market lost 1.6% after a decline of more than 14% in the previous week. MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.3%. My Bui, an economist at fund manager AMP, said investors have long worried that AI revenues may not be enough to justify the huge upfront outlay, particularly if infrastructure depreciates before it can be fully monetised. She added that higher government bond yields and wider corporate credit spreads are making it harder to borrow, refinance and keep the build-out going.
The concern is landing just as a string of major companies prepare to report earnings. Meta, one of the largest AI spenders, is due to publish results on Wednesday along with semiconductor companies Lam Research and Texas Instruments. Goldman Sachs has estimated that five AI hyperscalers together could lift capital spending to about $1.2 trillion next year. Other major names due to report include Netflix, Procter & Gamble, General Motors and GE Aerospace. Despite the unease, overall earnings are still expected to rise about 30%, helped by the extraordinary profits generated by large technology groups.
In Europe, political tension in France added to the cautious tone. EUROSTOXX 50 futures fell 0.4%, DAX futures lost 0.3% and FTSE futures were flat. The euro slipped 0.2% to $1.1212, moving closer to last week’s 16-month low of $1.1113. The dollar eased 0.1% against the yen to 157.75, as traders stayed wary of possible Japanese intervention and kept speculative bets restrained.
Gold, which does not yield interest, gained 0.4% to $4,181 an ounce as falling bond yields supported demand for defensive assets.
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