Asian equities retreated from a record as fresh concerns over the impact of artificial intelligence on various sectors pressured UStechnology stocksand spurred a flight to the safety of Treasuries.
The MSCI Asia Pacific Index dropped for the first time in six sessions with losses in Japan, while South Korean stocks edged a little higher. That came after the S&P 500 fell 1.6% and the Nasdaq 100 dropped 2% Thursday with megacaps slumping. The downdraft spread to areas including logistics and commercial real estate, in a sign investors are worried about the impact of AI.
Even so, some signs emerged in early Asian trading that markets may be able to find a foothold after the recent volatility with US equity-index futures edging up. Gold steadied on Friday after slumping 3% in its previous session with algorithmic traders appearing to amplify the precious metal’s sudden drop. Bitcoin edged higher after four days of losses.
The cross-asset weakness sent investors to the perceived safety of US Treasuries, which rallied across the curve on Thursday. That pushed the US two-year yield five basis points lower and the 10-year down seven basis points to 4.1%.
The sharp swings in US trading reflected the rising stakes tied to the AI boom and the unpredictable ripple effects across sectors, regions and asset classes. The moves highlighted how quickly shifts in sentiment around AI can reverberate far beyond the technology sector, with precious metals tumbling and traders plowing money into Treasuries.
“Software stocks are now trading like banks in 2008,” said Nick Ferres, chief investment officer of Vantage Point Asset Management in Singapore, referring to the global financial crisis. “Asia has performed well so far this year, but I am concerned about correlation to global markets and a tactical unwind,” he said.
Later Friday, January US inflation data is due, with the median forecast predicting a year-over-year increase of 2.5% for the core consumer price index, which strips out food and energy.
Traders continued to assign little chance that Federal Reserve officials will lower rates when they meet next in March, with a July cut fully priced in.
Markets are complacent on the outlook for US inflation, making trades that pay out if price pressures climb look attractive, said Benjamin Wiltshire at Citigroup Inc. Investors may be underestimating the resilience of the US consumer and market expectations for inflation are likely to be revised slightly higher, he noted.
“Markets seem to have this conviction that inflation is going to come down,” Wiltshire said in an interview. “We’re still in a structurally higher inflation environment.”
In commodities, oil slid as risk-averse sentiment pervaded global markets and investors digested fresh developments in US-Iran tensions that continue to cloud the supply outlook.
Despite the bearishness, there were pockets of good news for US stocks. Applied Materials Inc. surged 10% in late trading after delivering a surprisingly upbeat sales forecast, signaling that demand for artificial intelligence and memory semiconductors is fueling equipment purchases.
Anthropic, meanwhile, completed a deal to raise $30 billion in funding from investors at a $380 billion valuation, including the money raised. Elsewhere, OpenAI has warned US lawmakers that its Chinese rival DeepSeek is using unfair and increasingly sophisticated methods to extract results from leading US AI models, according to a memo reviewed by Bloomberg News.
In trade developments, the US and Taiwan finalized an agreement to lower tariffs, boost market access for American products in Asia and direct billions of dollars into US energy and technology projects.
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