Asian Stocks Slip at Open, Gold Close to $4,000: Markets Wrap

Asian equities posted a modest drop at the open after Wall Street’s pullback from record highs sparked caution among investors.

MSCI’s regional stock gauge dropped 0.2% with technology shares among the losers. The S&P 500 slipped 0.4% on Tuesday as concerns grew that a $16 trillion surge from its April lows was excessive. An index of US-listed Chinese shares fell the most since the end of August ahead of Hong Kong’s return from a holiday. Gold was just a touch short of $4,000 an ounce.

The yen extended its losses to a fifth day, sliding to the lowest against the dollar since February as Sanae Takaichi’s surprise win as the new leader of the ruling Liberal Democratic Party continued to weigh on the currency.

The Wall Street moves came amid growing chatter about a bubble forming around artificial intelligence as key players pledge billions of dollars in deals with a cohort of companies making infrastructure for the technology. As more money is spent, there’s mounting fear that the trend will end in a crash the way it did 25 years ago, following the dot-com euphoria.

“Profit-taking risks have rapidly risen across markets, and are particularly elevated for Nasdaq, potentially hampering further upside,” said Citigroup’s Chris Montagu.

In the US, investor optimism has grown heated in recent months, with many seeming too busy chasing the upside to worry about risks like a US government shutdown and stretched valuations.

Some Wall Street pros noted that having multiple large technology stocks surge by double-digits in quick succession could be a sign that valuations have become disconnected from underlying fundamentals.

Read More: OpenAI, Nvidia Fuel $1 Trillion AI Market With Circular Deals

While those concerns are legitimate and an ever-present risk, there was no fresh information that came to light overnight to really threaten the bull market, wrote Kyle Rodda, a senior market analyst at Capital.com in Melbourne.

“While these sorts of down days at the height of a bull market stoke commentary and concerns about the beginning of a deeper selloff, the catalyst isn’t really there at the moment,” Rodda wrote.

Traders also parsed remarks from Federal Reserve officials, with Governor Stephen Miran saying his expectations for a limited tariff impact on inflation mean the Fed can keep easing policy.

Fed Bank of Minneapolis President Neel Kashkari warned that any drastic rate cuts would risk stoking prices.

Elsewhere in Asia, Vietnam was upgraded to emerging-market status by FTSE Russell, potentially unlocking billions of dollars more in capital inflows.

New Zealand’s and Thailand’s central banks are both expected to cut rates by a quarter point later Wednesday.

In commodities, oil rose in early Asia trading after an industry report indicated a drop in stockpiles at a US delivery hub.

Stocks

S&P 500 futures were little changed as of 9:18 a.m. Tokyo time

Japan’s Topix rose 0.9%

Australia’s S&P/ASX 200 fell 0.3%

Euro Stoxx 50 futures fell 0.3%

Currencies

The Bloomberg Dollar Spot Index was little changed

The euro was little changed at $1.1646

The Japanese yen fell 0.3% to 152.30 per dollar

The offshore yuan was little changed at 7.1489 per dollar

Cryptocurrencies

Bitcoin fell 0.2% to $121,793.7

Ether fell 1% to $4,465.26

Bonds

The yield on 10-year Treasuries was little changed at 4.13%

Japan’s 10-year yield was unchanged at 1.675%

Australia’s 10-year yield declined two basis points to 4.36%

Commodities

West Texas Intermediate crude rose 0.6% to $62.13 a barrel

Spot gold rose 0.3% to $3,997.70 an ounce