(Bloomberg) — Stocks extended losses as uncertainty over Federal Reserve interest-rate cuts and stretched technology valuations weighed on sentiment, prompting investors to retreat from riskier corners of the market.
Asian shares fell 1.2% — with technology companies such as SK Hynix Inc. leading the losses — following the retreat in Wall Street benchmarks Thursday. Even so, MSCI’s gauge of global stocks is set for a fourth gain in five weeks. Bitcoin traded below $100,000 and is down more than 20% since early October. Oil jumped as traders weighed risks to Russian flows from US sanctions, which countered a slew of signs that the market faces a glut.
Treasuries and a gauge of the dollar steadied as investors parsed commentary from Fed officials that cast doubt over a December rate cut. Also, the October jobs report will be released without a reading of the unemployment rate.
Attention was also on the pound Friday, which fell after the Financial Times said UK Chancellor Rachel Reeves was ditching a planned income tax rise.
The moves dealt a fresh blow to risk sentiment, highlighted by heavy selling in high-flying tech giants amid mounting valuation concerns. Beneath the surface, some investors pointed to a rotation into more defensive sectors. With optimism over the US government’s reopening largely priced in, traders are now focusing on the upcoming wave of economic data, as the chances of a December Fed rate cut slip below 50%.
“Markets appear to be spooked to a large extent by AI froth fears,” said Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho Bank. “A Fed that is more likely to bide its time than race against it, makes it a lot less conducive for the tech rout, which typically tends to be more sensitive to Fed easing.”
Technology stocks have been under pressure recently as investors balanced optimism over technological advances with concerns over stretched artificial intelligence valuations. Wall Street chief executives have also adopted a more cautious tone recently, as the market’s gains since April’s slump have become increasingly concentrated in a handful of stocks, prompting some investors to warn of “froth” in the AI sector.
With President Donald Trump signing the legislation to end the longest shutdown in US history, investor attention is now turning to the slew of economic data that’s due to flow out. Even so, the October jobs report will skip the unemployment rate as the household survey wasn’t conducted, US top economic adviser Kevin Hassett told Fox News.
Some traders are also concerned that the omission of key may bolster arguments for Fed officials to stand pat. Currently, traders are pricing in about an even chance that the Fed will hold or cut rates in December.
Chair Jerome Powell said last month that a reduction is “not a foregone conclusion,” with the decision to be premised on incoming information.
In separate statements, Fed Bank of St. Louis President Alberto Musalem said officials should move cautiously on rates with inflation running above target, while Cleveland counterpart Beth Hammack noted policy should remain “somewhat restrictive.” Minneapolis Fed President Neel Kashkari said he didn’t support the last cut and is undecided about December.
Elsewhere, Trump is readying substantial tariff cuts designed to address high food prices and a series of new trade deals as he seeks to address voter concerns over the cost of goods.
Corporate News:
Verizon Communications Inc. is discussing plans to announce job cuts next week that could downsize the company by as much as 20%. A wave of voluntary and early retirement programs in Japan is on track to hit a four-year high, as companies from Panasonic Holdings Corp. to Japan Display Inc. try to balance an aging workforce with the need to boost competitiveness. Japan Airlines Co. has sought proposals from manufacturers for up to 70 regional and turboprop aircraft. Tencent Holdings Ltd. posted a faster-than-anticipated 15% rise in revenue. Separately, it struck a deal with Apple Inc. that will see the iPhone maker handle payments and take a 15% cut of purchases in WeChat mini games and apps, resolving a high-profile dispute. Kioxia Holdings Corp. shares were set to fall by their daily limit after the NAND memory maker’s current-quarter outlook missed expectations elevated by bullish comments from bigger rivals. Singapore Air shares fell after the carrier’s second-quarter net income slumped 82%. Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.1% as of 10:55 a.m. Tokyo time Japan’s Topix fell 0.8% Australia’s S&P/ASX 200 fell 1.4% Hong Kong’s Hang Seng fell 1.1% The Shanghai Composite fell 0.1% Euro Stoxx 50 futures fell 0.3% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1635 The Japanese yen was little changed at 154.47 per dollar The offshore yuan was little changed at 7.0926 per dollar Cryptocurrencies
Bitcoin rose 0.4% to $99,194.18 Ether rose 0.8% to $3,204 Bonds
The yield on 10-year Treasuries was little changed at 4.12% Japan’s 10-year yield was little changed at 1.695% Australia’s 10-year yield advanced three basis points to 4.45% Commodities
West Texas Intermediate crude rose 3.2% to $60.58 a barrel Spot gold rose 0.5% to $4,192.97 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Winnie Hsu and Richard Henderson.
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