Asian equities struggled on Tuesday as investors weighed rising oil prices, West Asia tensions and calls for AI development slowdown ahead of key central bank meetings. MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.12%, led by South Korea's 0.25% dip, while Japan's Nikkei edged 0.19% higher after reversing early losses, according to Business Standard. The decline follows a retreat on Wall Street on Monday, where the Philadelphia Semiconductor Index tumbled 5.9% — its biggest drop in more than two months — with Nvidia Corp. and Intel Corp. among the decliners. Chip-related shares were mixed, with South Korea's Samsung Electronics losing 0.2% while Japan's Kioxia gained 3.3%, reflecting varied sector performance amid ongoing AI development concerns.
Renewed supply concerns kept markets on edge as US crude rose 1.27% to $102.68 a barrel while Brent advanced 1.21% to $106.96 per barrel, as reported by Business Standard. This represents a significant escalation from previous levels when Brent crude topped $100 a barrel in Asian trade as Washington and Tehran stepped up strikes on ships and key military bases. Yemen's Iran-aligned Houthis launched a new attack on Saudi Arabia on Monday, after Riyadh blamed Iran-backed fighters in Iraq for an attack on the kingdom's east-west pipeline that it said could disrupt as much as 4% of global oil supply. For India, the world's third-largest oil importer and consumer, higher oil prices threaten to swell the import bill, strain government finances, stoke inflation and sour sentiment across financial markets. The rupee also slipped for a fifth day against the dollar, reflecting the broader impact of elevated oil prices on the currency.
Calls by leading AI figures to slow development continued to reverberate through markets even as US President Donald Trump played down concerns over misuse of the technology, according to Business Standard. The comments weighed heavily on major US AI stocks, with Nvidia falling 3%, Broadcom and Advanced Micro Devices declining more than 4%, Intel dropping more than 5%, and Marvell Technology sliding more than 7%. A 3,800-word missive by Anthropic PBC Chief Executive Officer Dario Amodei — which was endorsed by OpenAI CEO Sam Altman and SpaceXAI CEO Elon Musk — said development of the most advanced systems must be slowed in order to prevent AI slipping beyond human control and inflicting catastrophic harm. OpenAI CEO Sam Altman also said an IPO this year would be 'ill-advised', adding another layer of uncertainty around the sector. US President Donald Trump attacked Anthropic's chief for urging a slowdown in AI development, intensifying his opposition to new guardrails, blaming a 'SICK conspiracy' for voter backlash against AI data centers and growing concerns over frontier models.
The Federal Open Market Committee begins its two-day meeting later in the day, with markets pricing in a 90% chance of a rate hike that would mark the Fed's first increase since mid-2023, according to Business Standard. Overnight, benchmark 10-year US Treasury yields touched 5% for the first time since 2023, while Germany's 10-year bond yield climbed above 3.51%, its highest level since 2009. On Tuesday, Japan's benchmark 10-year government bond yield popped back to 3%. Analysts at Morgan Stanley expect a 25 basis-point hike on Wednesday and in December, noting that while inflation continues to decelerate, recent upside surprises mean the pace of disinflation has been slower than the Fed likely requires. The recent rout in the bond market has increased the stakes for Fed Chair Kevin Warsh going into the central bank's policy announcement, with traders pricing in a 95% chance of an interest-rate increase.
The Bank of Japan is widely expected to raise its interest rate by 25 basis points to 1.25% at the end of its two-day meeting on Friday and signal more tightening ahead, as reported by Business Standard. Policymakers are seeking to shore up the yen after intervention helped steer the currency away from a 40-year low. In currency markets, the dollar index rose 0.05% to 99.53, with the euro down 0.03% at $1.1543. Against the Japanese yen, the dollar advanced 0.17% to 154.61. Spot gold eased 0.15% to $4,291.59 an ounce, while spot silver fell 0.31% to $63.03 an ounce. For Asian markets, investors will track movements in US technology stocks, crude oil prices and Treasury yields, while keeping an eye on the Federal Reserve's policy signals and the Bank of Japan's upcoming decision.
