Asian equity markets experienced a significant downturn on Thursday, following a sharp sell-off on Wall Street. Investor sentiment soured due to growing anxieties surrounding the technology sector and the massive capital expenditures being directed towards artificial intelligence.
Major Indices in the Red
Key benchmarks across the region painted a bleak picture. Hong Kong's Hang Seng Index (HSI) was trading down by 111 points, or 0.44%, at 25,357 around 10:38 AM IST. Japan's Nikkei 225 shed a substantial 422 points to reach 49,089. South Korea's Kospi was not spared either, losing 1.39% to fall to the 3,999 level.
Federal Reserve and Economic Data in Focus
The optimism for a year-end market rally has weakened considerably. This shift follows the US Federal Reserve's indication last week that it might pause its cycle of interest rate cuts as early as next month. While three consecutive rate reductions had buoyed stock markets in recent months, investors are now worried this supportive policy may be ending. With uncertainty rising, all eyes are on the key US inflation data scheduled for release later on Thursday, which will provide crucial clues about the Fed's future monetary policy moves. A US jobs report released earlier this week failed to offer clear direction.
Technology Sector Under Pressure
The spotlight has firmly returned to technology stocks, with mounting fears that their valuations have disconnected from fundamental business performance. Tech and chipmaking companies have been the primary engine driving global markets to record highs this year. However, skepticism is growing about how long corporate earnings can justify the enormous sums being invested in AI and when these investments will translate into meaningful profits.
These concerns were amplified on Wednesday after reports surfaced that private capital firm Blue Owl had withdrawn from Oracle's planned $10 billion data centre project, casting doubt on its future. This development came shortly after both Oracle and semiconductor giant Broadcom reported weaker-than-expected earnings last week.
The market reaction was severe. Oracle shares plunged more than five percent on Wednesday, with Broadcom also moving lower. The selling pressure spread across the sector, dragging down other major players like Nvidia, Alphabet, and Advanced Micro Devices. The technology-heavy Nasdaq Composite index fell 1.8%, and the broader S&P 500 declined by more than one percent.
Oil Prices Climb Amid Geopolitical Tensions
In other markets, oil prices rose by more than one percent for a second straight day. This increase followed a US announcement that its forces had struck a vessel in the Pacific Ocean, which Washington claims was involved in drug trafficking, resulting in four fatalities described as "narco-terrorists." This incident added to existing tensions related to Venezuela, after US President Donald Trump ordered a blockade of oil tankers labelled as "sanctioned" traveling to and from the country. Venezuelan President Nicolas Maduro has accused the US of seeking regime change rather than focusing on its stated goal of curbing drug trafficking.
