Asian stock markets opened lower on Friday, extending the previous session's weakness after a sharp rise in oil prices and another round of selling in technology stocks fuelled concerns over inflation and the outlook for artificial intelligence-driven investments.
Japan's Nikkei 225 fell 2.46%, South Korea's Kospi declined 3.04%, Australia's ASX 200 lost 0.57%, while China's Shanghai Composite edged 0.01% lower.
Investors continued to pull back from technology shares amid growing doubts over whether the massive sums being invested in artificial intelligence will generate returns that justify current valuations. The cautious mood spread across the region after Wall Street posted its steepest decline in nearly a month.
Crude oil remained at the centre of attention as Brent traded above $100 a barrel, adding to concerns that higher energy costs could keep inflation elevated and delay any easing in global monetary policy. The surge in oil prices also weighed on bond markets, pushing U.S. Treasury yields to their highest levels this year and supporting the dollar.
The jump in crude has complicated the outlook for central banks. Money markets are increasingly pricing in tighter monetary policy, with traders expecting the Federal Reserve could raise interest rates as soon as September. Earlier, European Central Bank President Christine Lagarde also signalled that policymakers could consider another rate increase after leaving the deposit rate unchanged at 2.25%.
Safe-haven demand remained mixed. Gold traded near $4,050 an ounce after retreating about 2% in the previous session as expectations of higher interest rates reduced the appeal of non-yielding assets. Government bonds in Australia and New Zealand also weakened in early trading, mirroring losses in U.S. Treasuries.
Currency markets reflected the shift in sentiment. The Japanese yen remained under pressure near 163.93 against the U.S. dollar even after Japan's preferred measure of inflation accelerated for the first time in three months, reinforcing expectations that the Bank of Japan could tighten policy again later this year.
Trade policy added another source of uncertainty after the Trump administration announced tariffs of between 10% and 12.5% on imports from most major trading partners, marking its most significant expansion of trade barriers since the Supreme Court cleared the way for the measures.
Wall Street provided a weak lead overnight. The Dow Jones Industrial Average fell more than 500 points, or about 1%, marking its fifth decline in six sessions. The S&P 500 dropped 1.2%, while the Nasdaq Composite tumbled 2.2%, its biggest one-day decline since late June, after disappointing earnings from two large-cap companies and another slide in semiconductor stocks.
U.S. futures were steadier in early Asian trade. S&P 500 futures were little changed, Nasdaq-100 futures rose 0.3% and Dow Jones Industrial Average futures slipped about 20 points.
Investors are expected to remain focused on developments in the Middle East, movements in crude oil prices, the outlook for interest rates and upcoming corporate earnings as they assess whether volatility in technology stocks is likely to persist.
(With inputs from Bloomberg.)
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
