Asian shares follow the losses on Wall Street, bonds rise

Asian shares tumbled after turmoil on Wall Street, where a brief rally led by Nvidia Corp. quickly faded and investors retreated from riskier assets such as cryptocurrencies.Stocks in Japan, South Korea and Australia opened lower after Wall Street benchmarks erased earlier gains and plunged, led by technology stocks. The sharp turnaround came as lingering concerns about inflated valuations and heavy capital spending curbed a rally fueled by Nvidia’s upbeat earnings forecasts, with shares of AI Bellwether falling 3.2%.

Attention is also turning to Japan, where the government will unveil a stimulus package. The yen was stable against the dollar as Finance Minister Satsuki Katayama said Japan will consider currency intervention as one of its options if there are excessive movements in the currency market.Mounting scrutiny over whether AI investments were generating enough revenue and profits to justify the increase in infrastructure spending continued to drive market volatility. Adding to the unrest was continued uncertainty about the Federal Reserve’s ability to cut rates next month, as recent comments from policymakers signaled caution about easing policy too quickly.

“Will AI be as profitable as the market prices it in? That is the key question,” said Matt Maley, chief market strategist at Miller Tabak + Co. LLC. Traders worry whether AI investments now would be profitable in five years, he added. “The result is people saying, ‘I need to get some chips off the table.’”

According to data compiled by Bloomberg, the S&P 500 benchmark recorded its biggest intraday swing – of 3.6% – since the height of the rate unrest in April. The indicator is now down 5% from its most recent peak. The Cboe Volatility Index rose to 28, above the key level of 20 that worries traders, much like Bitcoin sunk down $87,000 for the first time since April. As risk sentiment worsened, government bonds rose across the curve on Thursday, sending the yield on the 10-year benchmark down five basis points to 4.08%. US stock prices are still at the levels of previous periods of exuberance, even after a pullback that pushed the S&P 500 to its worst November since 2008. Questions around whether AI generates enough revenue or profit to justify massive infrastructure spending also weighed on sentiment Thursday.

“We are at a ‘show me’ point,” said Martin Schulz, head of international equities at Federated Hermes. “Despite all the headwinds – tariff uncertainty, regional war, geopolitical tensions and economic slowdown – global stock markets have had a strong run. Now it’s time for the world’s companies to realize their gains.”

A long-delayed government employment report was also released Thursday, showing that US job growth picked up in September, while the unemployment rate rose.

The data showed that the labor market showed signs of stabilizing before the government shutdown. The figures come a day after minutes from the Fed’s latest policy meeting showed a divided committee over whether to cut rates again.

Fed Governor Michael Barr said the US central bank should be cautious in considering additional interest rate cuts with inflation still above target. Following new employment data, Barr said he sees “some kind of cooling” in the labor market, with the economy creating jobs near the so-called break-even rate, keeping unemployment stable.