Technology giants' earnings season has officially begun, with global markets watching cautiously amid multiple layers of uncertainty.
Nasdaq 100 futures moved lower, Asian stock markets extended their losing streak, while oil prices retreated from a six-month high, offering some buffer to the market.
This week, tech heavyweights including Microsoft, Alphabet, and Amazon will release earnings in succession, testing whether AI infrastructure spending can be sustained.
Meanwhile, both the Federal Reserve and the Bank of Japan will announce rate decisions, with global bond and currency markets expected to see heightened volatility as a result.
In pre-market US trading, SK Hynix rose over 1%, as the company plans to distribute a $12.1 billion special dividend, using proceeds from the sale of its stake in Kioxia to reward shareholders.
Brazil's election results also rattled markets. Luiz Inácio Lula da Silva unexpectedly defeated right-wing candidate Flávio Bolsonaro in Sunday's runoff, sending Brazil-focused ETFs listed in Japan plunging as much as 16% intraday, while CME foreign exchange derivative contracts indicated an implied decline of more than 10% for the real against the dollar.
Nick Twidale, chief market analyst at AT Global Markets in Sydney, noted in a research report that market focus will "shift from the geopolitical headlines that have dominated for weeks back to central bank policy and interest rate direction."
In pre-market US trading, SK Hynix rose over 1%, as the company plans to distribute a $12.1 billion special dividend, using proceeds from the sale of its Kioxia stake to reward shareholders.
South Korea's KOSPI closed down 1.45% at 5,469.59, Japan's Nikkei 225 fell 0.8% to 62,189.65, while the Topix bucked the trend to gain 0.2% at 3,972.98.
European stocks opened mixed, with the Euro Stoxx 50 up 0.07%, Germany's DAX up 0.28%, the UK's FTSE 100 down 0.17%, and France's CAC 40 up 0.60%.
The US 10-year Treasury yield edged down 3 basis points to 4.97%, with Treasuries broadly strengthening.
Japan's 10-year government bond yield fell 2 basis points to 2.780%.
Brent crude retreated from a six-month high, dropping 1.5% to around $114.95 per barrel.
Spot gold rose 0.3% to $4,008.18 per ounce.
Bitcoin declined 0.6% to $79,916.76.
AI Trades Remain Under Pressure, Chip Stocks Lead Asian Declines
The cooling sentiment around AI-related trades was particularly evident in Asian markets. South Korea's KOSPI closed down 1.45% at 5,469.59, with AI concept stocks posting weak performance. Goldman Sachs strategists promptly cut their KOSPI target by 25%. Chinese AI model developers also followed the downward trend, as Moonshot's release of a new model triggered a reassessment of the competitive landscape.
Japan's market showed divergence. The Nikkei 225 fell 0.8% to 62,189.65, with chip-related stocks the biggest drag and the worst-performing sector for the index this week; however, the Topix bucked the trend to gain 0.2% at 3,972.98. Overall, the MSCI Asia index has fallen for four consecutive weeks, the longest losing streak since April this year.
Nasdaq 100 futures dropped 0.2%, with the underlying spot index having posted declines for two consecutive weeks, and the US semiconductor index also recorded its longest losing streak since November. European stocks opened relatively independently, expected to gain about 0.3%.
Central Bank Decisions and Earnings Week Present Dual Test
This week's market calendar is packed. Nick Twidale, chief market analyst at AT Global Markets in Sydney, noted in a research report that market focus will "shift from the geopolitical headlines that have dominated for weeks back to central bank policy and interest rate direction."
The policy decisions from the Federal Reserve and the Bank of Japan are drawing close attention, as both face pressure from stubborn inflation, rising energy costs, and elevated global bond yields. The US 10-year Treasury yield edged down 3 basis points to 4.97%, with Treasuries broadly strengthening.
Eugene Leow, senior rates strategist at DBS Bank in Singapore, said, "AI doubts, growth slowdown risks, and political uncertainty from European and US midterm elections will keep demand for safe-haven assets at high levels. At current absolute yield levels, US Treasuries should serve well as a safe-haven hedge."
French bond futures strengthened notably, outperforming German bund futures. Moody's maintained France's credit rating unchanged, and coupled with the absence of large-scale renewed violence, market sentiment received a boost. Bloomberg strategist Mark Cranfield noted that investors will watch whether the German-French spread can narrow after its recent significant widening.
Oil Retreats, Trump's Iran Remarks Stir Market
Global crude benchmark Brent retreated from a six-month high, falling 1.5% to around $114.95 per barrel, partially easing inflation pressure on the market.
In an interview with Fox News, Trump said it is "getting to be a time for a decision" on whether to reach a deal with Tehran or "finish it off," using tough language. Meanwhile, Iran is reportedly set to host a regional security dialogue with senior security and defense officials from Saudi Arabia, Pakistan, and Turkey in attendance.
Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis, said in an interview with Bloomberg Television that if data center construction cannot keep pace with growing computing demand, AI's rapid adoption itself could bring inflationary pressure—a risk that has not yet been fully priced in by the market.
Brazil Election Shock: Real Faces Double-Digit Decline Pressure
Brazilian markets are expected to face severe selling pressure after this week's open. Lula's unexpected victory caught many investors favoring the right-wing candidate off guard, and Bolsonaro immediately announced he would seek to have the runoff result annulled.
CME exchange real foreign exchange derivative contracts show an exchange rate of about 5.55 per dollar, implying a decline of more than 10% from Friday's close. ETFs listed in Japan tracking Brazilian assets plunged as much as 16% intraday.
Anna Wu, founder and investment strategist at investment research firm Floodlines Research, said, "The market was completely unprepared for this outcome. In my view, this is not just an emotional reaction—local markets now face tangible risks of government debt expansion and currency depreciation."
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