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Asian stock markets saw mixed results on Monday due to two main concerns: the growing possibility that the US Federal Reserve will not cut interest rates next month and persistent fears that the tech sector’s high valuations are creating an AI bubble.
Recent optimism for rate cuts, which was fuelled by earlier signs of a weakening US job market, has faded.
Fed Chair Jerome Powell and other officials suggested a third consecutive rate reduction is not certain, as inflation remains stubbornly above the two per cent target.
Investors are now anxiously awaiting key US job and inflation reports, which were delayed by the recent government shutdown.
The uncertain mood is particularly weighing on the crypto sector, with Bitcoin briefly erasing all of its year-to-date gains before stabilising slightly above the year’s opening price.
In Japan, the Nikkei 225 fell, largely due to tensions with China. China’s warning to its citizens to avoid travelling to Japan, following controversial comments made by Prime Minister Sanae Takaichi regarding Taiwan, severely impacted tourism-related stocks.
Companies like Shiseido, Takashimaya, and Fast Retailing (owner of Uniqlo) saw sharp drops.
Overall, major indexes like Hong Kong and Shanghai closed lower, while Tokyo also sank.
Adding to the bubble concerns, all eyes are on the upcoming earnings report from chip giant Nvidia, which recently reached a $5 trillion valuation, as analysts question the sustainability and returns on the massive cash flow directed toward artificial intelligence development.
