Asia-Pacific markets searched for footing in a volatile Monday morning session, with South Korean stocks rebounding from steep losses, US equity futures bouncing back, and the risk pressure that followed last week's chip stock selloff easing for now.
South Korea's Kospi briefly turned positive, lifted by gains in Samsung and buying from local funds, after earlier falling more than 3%. Japanese stocks also pared losses, with the Nikkei 225 narrowing its decline to about 1% after an early drop of more than 2%.
US futures climbed, with Nasdaq 100 futures extending gains to 1% and S&P 500 futures rising 0.5%. This offered some support during Asian trading hours after US tech and chip stocks came under pressure, as the market repriced the durability of the AI trade.
Oil retreating from a five-month high also eased some inflation and risk-asset pressure, with Brent crude falling 1.7% to $108 a barrel as traders weighed escalating geopolitical conflict against regional supply nearing pre-war levels.
Korean Stocks Rebound, Asia-Pacific Losses Narrow
Korean stocks were the key development in early Asia-Pacific trading, with the Kospi reversing an early decline of more than 3% to turn higher, as Samsung gains and local fund buying were seen as the main drivers. Earlier, the small-cap Kosdaq index had fallen 0.93%.
Japanese stocks remained in correction mode, but losses narrowed noticeably. The Nikkei 225 fell more than 2% early before paring the decline to about 1%. The Topix was earlier down 1.12%. Australia's S&P/ASX 200 index bucked the trend, rising about 0.37%.
The MSCI Asia-Pacific index was down 0.5% at one point in early trading, dragged mainly by early declines in Japanese and Korean markets. As Korean stocks rebounded and US futures recovered, pressure on regional markets eased somewhat, though overall risk appetite remains swayed by volatility in the AI trade.
Korea's local macro outlook also drew attention. According to Yonhap, the country's finance minister estimated 2026 economic growth at 3.4% to 3.6%.
US Futures Rebound, AI Trade Faces Earnings Test
The rebound in US futures was the core variable behind improved sentiment in Asia-Pacific markets, with S&P 500 futures up 0.5% and Nasdaq 100 futures extending gains to 1%, continuing a recovery trend.
The bounce followed a sharp selloff in tech stocks last week, when the Nasdaq 100 fell 5.5% and a closely watched semiconductor gauge posted its longest losing streak since 2008. Data showed the S&P 500 fell nearly 2% last week, its largest weekly drop since late June, while the Nasdaq fell 4.5%.
This week's earnings will be key to market direction, with more than 70 S&P 500 companies set to report, including Magnificent Seven members such as Tesla and Meta. Investors will focus on whether AI infrastructure spending can generate sufficient returns.
Kyle Rodda, a senior analyst at Capital.com, said the market is in a "classic period of heightened uncertainty," with AI earnings, interest-rate uncertainty and the upcoming midterm elections all influencing investor judgment at the same time.
AI Credit Stress Remains a Market Concern
Pressure on the AI trade has not disappeared. According to a report citing sources, Anthropic's third-quarter revenue was $16.8 billion, up from $11.6 billion in the second quarter, but the growth rate still raised investor doubts about the AI buildout cycle.
CoreWeave became a focal point of market worry. The company relies heavily on debt to build data centers and lease them to tech companies, and its shares fell 25% last week, the biggest weekly drop since November 2025. CoreWeave's credit default swaps have reached distressed levels, according to the report.
Goldman Sachs traders noted Friday that AI-related credit spreads, especially those tied to hyperscale cloud service providers, were at their widest levels of the year. Their view suggests the market debate is shifting from short-term earnings upgrades toward AI capital expenditure, financing sustainability and return on capital.
According to Bloomberg strategist Mark Cranfield, investor sentiment is cautious, the geopolitical situation remains fluid, and this week's earnings calendar is dense. Still, after the recent sharp declines in chip stocks, dip buyers may see the current environment as an entry window.
Bonds and Gold Reflect Haven Demand
Volatility in risk assets pushed bonds and gold into focus, with the 10-year US Treasury yield falling about 17 basis points last week and holding near 5.06% on Monday. US Treasuries showed signs of reasserting their role as a safe-haven asset.
Bond volatility remained elevated, and fuel and food inflation pressures continued to shape central bank expectations. Traders stayed cautious on the Federal Reserve's rate path, while the market also watched the impact of rising corporate financing costs on AI-related companies.
Gold rose on Monday, with spot gold up 0.2% at $4,173.15 an ounce. Earlier, traders reduced bets on a rate hike this month after Federal Reserve Chair Warsh's remarks on Friday.
Foreign exchange moves were relatively limited. The Bloomberg dollar spot index was little changed, the yen rose 0.1% to 157.83 per dollar, and the Australian dollar gained 0.3% to $0.6966.
Oil Retreats, but Energy Risks Still Weigh on Markets
Oil fell on Monday, giving stocks some breathing room. Brent crude slipped from a five-month high, while WTI crude dropped 1.32% to $97.71 a barrel.
Traders remained focused on energy supply risks. The market continued to watch for an increase in attacks on ships in the Persian Gulf and mutual strikes by Ukraine and Russia on energy infrastructure. Longer-dated crude futures have already risen on expectations that disruptions to energy infrastructure could extend into 2027.
In the near term, lower oil prices help ease pressure from the inflation trade, but uncertainty in energy markets could still amplify swings in stocks and bonds.
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