The positive momentum from Wall Street's tech rally failed to carry over into Asian markets on Tuesday, as persistent uncertainty surrounding the artificial intelligence trade continues to weigh on sentiment. The Japanese yen pulled back after a four-day advance driven by intervention, while crude oil prices saw a modest increase.
South Korea's Kospi index fell 1.5%, reversing an earlier intraday gain of 2.1%. The broader MSCI Asia Pacific Index declined 0.7%, with eight of its 11 industry sectors posting losses. In contrast, Nasdaq 100 futures rose 0.4% in after-hours trading. Palantir Technologies surged 14% after the bell following an upward revision to its earnings outlook, while Amazon.com Inc slipped 1.6% after Chairman Jeff Bezos disclosed a share sale plan.
In a press conference at the White House, President Donald Trump stated that the US and Iran are in dialogue, calling the negotiations Iran's "last chance before a decapitation strike." He also expressed a desire for the full reopening of the Strait of Hormuz. These comments helped push WTI crude oil futures up 0.8% to around $81 per barrel, recovering some of the more than 5% plunge from the previous day. US Treasury bonds also gave back some of their recent gains, with the yield on the 10-year note rising 2 basis points to 4.69%.
This week is packed with high-impact events. SpaceX is set to release its first earnings report since its IPO on Tuesday, and up to $116 billion in shares are expected to become eligible for sale next month, marking one of the largest stock lockup expirations in capital markets history. Meanwhile, Friday's US non-farm payrolls report will be a key reference for investors trying to gauge the Federal Reserve's next move on interest rates.
Asian Markets Under Pressure as Tech Volatility Persists
The MSCI Asia Pacific Index fell 0.7%, with eight of its 11 sectors in the red. The index has now declined for two consecutive sessions after surging 5% last Friday. The regional semiconductor index dropped 1%, and the Kospi's volatile trading, which saw it swing from a 2.1% gain to a 1.5% loss, highlights the deep market divisions over the AI investment theme.
Wall Street's mood was comparatively more optimistic. Nasdaq 100 futures rose 0.4%. While Palantir Technologies surged 14% after raising its earnings guidance, Amazon fell 1.6% in after-hours trading following Chairman Bezos's disclosure of a share sale plan. Amazon had previously rallied for three consecutive days, pushing its market capitalization to $3 trillion on Monday.
The high volatility in AI-related trading is starting to impact the asset management industry. According to Bloomberg, Coatue Management's hedge fund suffered an 8.3% loss last month due to sharp swings in AI stocks, making it the latest technology-focused fund manager to suffer significant losses.
Yen Retreats, Japanese Bond Auction Sees Weakest Demand
The Japanese yen weakened 0.3% to 157.64 against the US dollar, ending a four-day winning streak. The yen had appreciated sharply earlier in the morning session, fueling speculation of another round of official intervention, which would follow the coordinated US-Japan action seen last week.
Japan's government bond market also came under pressure. Ten-year bond futures fell, and the day's auction for 10-year debt saw the weakest demand since May 2025, adding complexity to market expectations for the trajectory of Japanese interest rates.
Jobs Data and SpaceX Earnings as Key Catalysts
Market participants are in a holding pattern. Billy Leung, an investment strategist at Global X Management, noted, "Investors are actually waiting for data to provide clearer guidance on the direction of rates, rather than trading on rhetoric. Friday's US non-farm payrolls number is the next real test."
Fabien Yip, a market analyst at IG International in Sydney, also commented, "Investors are staying cautious ahead of the SpaceX earnings report and the jobs data, while simultaneously digesting the complex signals coming from the Middle East situation."
Data released on Monday showed that US manufacturing activity expanded at its fastest pace in over four years in July, with a significant increase in output and businesses adding to payrolls. This provides a positive leading signal for the labor market.
Bull Case for US Stocks Remains Intact as Market Shifts from Liquidity to Fundamentals
In the previous session, Wall Street saw a strong rebound, with the large-cap index recording its best single-day performance since March. The S&P 500 closed near its all-time high, and the semiconductor index rose about 1%.
Scott Rubner of Citadel Securities believes the core drivers that have pushed US stocks to new highs this year remain "solidly in place," and that the pullback in speculative retail trading does not change the overall bullish picture. In a research note, he wrote, "The market is transitioning from a liquidity-driven environment to one increasingly dominated by earnings, corporate demand, and the macroeconomic backdrop."
Chris Larkin from E*Trade, a Morgan Stanley unit, cautioned that the intermittent nature of US-Iran diplomatic relations means this week's earnings data and the jobs report will have to bear a heavier "burden of proof" for the bull camp.
Spot gold edged up 0.13% to $4,060.41 per ounce.
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