Markets throughout Asia were preparing for declines Monday morning following a substantial technology sector selloff that brought Wall Street’s impressive nine-week rally to an end, while escalating Middle East tensions drove oil prices and the dollar upward.
Early indicators including futures trading and Friday’s exchange-traded fund activity suggested significant losses ahead for Japanese and South Korean markets, with S&P 500 futures declining 0.2% during early Asian trading hours.
Friday saw the Nasdaq tumble 4.2%, with semiconductor companies bearing the brunt of the selling pressure after strong employment data heightened expectations that the Federal Reserve will implement additional interest rate increases, effectively halting what had been a remarkable artificial intelligence-fueled market surge.
Treasury yields on two-year notes climbed more than 11 basis points Friday, while benchmark 10-year Treasury futures dropped approximately five ticks during early Monday morning trading in Asia.
“The AI-drives-everything narrative frayed last week,” said Bob Savage, head of markets macro strategy at BNY.
“Whether this is a healthy pause in the nine-week equity rally or a top remains the key question. The IPO focus on SpaceX and Anthropic is part of the pause – whether to make room for the new market cap or to rethink value.”
The upcoming week features the highly anticipated SpaceX public offering, scheduled to price Thursday and begin trading Friday, while also bringing inflation data into focus with U.S. consumer price information expected Wednesday alongside central bank meetings in Canada and Europe.
Bitcoin experienced its worst weekly performance since the FTX cryptocurrency exchange collapse in late 2022, dropping approximately 16% and trading near $63,000 Monday.
The SpaceX launch is anticipated to precede additional major public offerings from Anthropic and OpenAI in upcoming months, with brokers expressing concern that the massive capital raising could pull money away from other investments.
Middle East developments continue creating market uncertainty, with Brent crude futures climbing roughly 2.6% to $95.45 per barrel Monday morning following Israeli operations in Beirut that triggered Iranian missile strikes against Israeli positions.
OPEC+ members agreed Sunday to implement their fourth oil production target increase in four consecutive months.
Currency markets showed dollar strength, with the greenback maintaining levels above 160 yen while pushing the Australian dollar to $0.7038. The euro remained steady at $1.1518.
