Asian stocks dip after volatile US day, bonds ease

Asian stocks slipped at the open Friday after choppy trading on Wall Street, weighed down by concerns over stretched artificial intelligence valuations and signs of a cooling labor market.

The MSCI Asia Pacific Index fell 0.2%, led by losses in Japan. Gauges in South Korea and Australia also edged lower. The S&P 500 fell 1.1% and the Nasdaq 100 dipped 1.9% Thursday as the indexes dropped for the second time in three sessions. High-flying AI stocks from Nvidia Corp. to Palantir Technologies Inc. declined. A closely watched volatility gauge briefly topped 20.

Treasuries edged lower in early Asian trading with a chorus of Federal Reserve officials warning about lingering inflation impeding possible rate cuts. 10-year Treasury yields had their biggest drop in a month in the previous session after data showed the steepest October job cuts in more than two decades. A Bloomberg gauge of the dollar was little changed after sliding the most since mid-October.

The MSCI All Country World Index is on track for its first weekly decline in four, as investors who drove the rally on expectations of Fed rate cuts and AI-fueled growth now question whether massive capital spending will pay off. Wall Street chief executives have also struck a more cautious tone over a narrowing group of stocks driving the market’s gains.

“The market seems to have continued angst about the valuations of AI stocks,” said Jonestrading’s Dave Lutz, adding that semiconductor stocks were “under decent pressure.”

The selloff this week came as earnings season winds down and as investors become reliant on private data amid a dearth of economic figures due to the ongoing US government shutdown.

The latest private data release, from Challenger, Gray & Christmas Inc., showed companies announced 153,074 job cuts last month, almost triple the number during the same month last year and driven by the technology and warehousing sectors.

It’s the most for any October since 2003, when the advent of mobile phones was similarly disruptive, said Andy Challenger, the company’s chief revenue officer.

The Challenger report is “the biggest issue, suggesting the Fed is ‘wrong’ about putting the December cut in question,” said Michael Green, chief strategist and portfolio manager for Simplify Asset Management.

Meanwhile, Fed Cleveland President Beth Hammack said inflation is a bigger risk than job weakness. Her Chicago counterpart Austan Goolsbee told CNBC that a lack of inflation data during the shutdown makes him uneasy about rate cuts. Governor Michael Barr said officials still have work to do on inflation while ensuring the labor market is solid.

Fed St. Louis President Alberto Musalem said the central bank must keep downward pressure on inflation, cautioning that interest rates are approaching the level that would no longer provide that pressure.

Money markets are now implying a better-than-70% chance of a Fed cut next month.

Back to stocks, the sudden focus on the financing needs of OpenAI — the maker of ChatGPT — and other companies in the industry came as investors were already on edge following remarks from Wall Street executives about frothy tech valuations.

Their warning fueled jitters in the market earlier in the week, leading to a 2.1% drop in the tech-heavy Nasdaq 100 Index on Tuesday. After recouping some of that loss on Wednesday, the index slid another 1.9% on Thursday. It’s now down almost 4% from its last record on Oct. 29, though still up nearly 20% so far this year.

Elsewhere, the US is pushing forward on President Donald Trump’s pledge to pause a series of penalties aimed at China’s shipbuilding industry, proposing pausing tariffs on imports of ship-to-shore cranes and chassis from China.

In commodities, oil edged higher Friday but was set for a second weekly drop, as supply increases around the world heighten concerns about the size of a forming glut.

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