Shares stumble, oil rises as markets await AI sector results - The Straits Times

Brent rose to US$109.64 per barrel.

TOKYO – Asian stocks retreated broadly on Oct 20 while oil rose as geopolitical risks rattled sentiment ahead of key results from artificial intelligence bellwether companies.

The euro recouped some losses from the previous session that were spurred by escalating riots in France. Crude prices resumed their climb as markets weighed an executive order from US President Donald Trump that waived some sanctions and tariffs on Russian energy.

The spotlight now turns to corporate earnings, with investors seeking fresh evidence that consumers and the broader economy remain resilient. Quarterly earnings are due from SpaceX and Netflix on Oct 20, with results from AI heavyweights such as Meta and Tesla scheduled for later in the week.

“The market is happy to cover shorts and unwind defensive trades, but that’s very different from having the conviction to rebuild aggressive exposure to AI,” Chris Weston, head of research at Pepperstone, said in a note.

“French sovereign risk is clearly being priced into European equities, but the euro’s resilience suggests traders aren’t yet treating it as a systemic European problem.”

The MSCI Asia ex-Japan index fell 1.14%, while Japan’s Nikkei 225 dropped 0.98%. South Korea’s KOSPI tumbled 3.92%.

In early European trade, the pan-region Euro Stoxx 50 futures slipped 0.57%, German DAX futures dipped 0.33% and FTSE futures lost 0.47%. US stock futures, the S&P 500 e-minis, rose 0.12% to 7,743.5.

The dollar index, which measures the greenback against a basket of currencies, fell 0.16% to 101.80, with the euro up 0.17% at US$1.1229. The Japanese yen strengthened 0.16% to 158.24 per dollar, and sterling rose 0.21% to US$1.3327.

Overnight, the French authorities set curfews in parts of several cities including Paris, Lille and Nice, after a weekend of riots and looting stemming from nationwide anti-government protests.

And in the Middle East, dozens were killed and more than 200 were injured after an attack by the Iran-aligned Houthis on a government security forces training camp in Yemen’s Shabwa province.

Netflix is expected to report slowing revenue growth in the third quarter, while SpaceX is forecast to report US$12.74 billion (S$16.3 billion) in quarterly revenue. General Motors, Hasbro, Halliburton, and 3M are among the more established names due to report on Oct 20.

Along with quarterly results, markets are increasingly focused on the massive spending plans of the major AI players. Facebook operator Meta is one of five AI hyperscalers expected to increase combined capital expenditure to about US$1.2 trillion (S$1.5 trillion) in 2027, according to Goldman Sachs.

“Investors are fine with AI being used more. What they’re questioning is whether every dollar of AI capex earns more than it costs to finance,” said Ninghui Liu, head of investment strategy and research for APAC at State Street Investment Management.

“AI has gone from an earnings story to a balance-sheet story, and now a unit-economics story to some extent.”

Shares in South Korean artificial intelligence infrastructure company Elice Group plunged nearly 30% below their initial public offering (IPO) price in their market debut, after the firm raised 201.1 billion won (S$194 million) in an IPO.

US crude rose 0.18% to US$103.85 a barrel and Brent rose to US$109.64 per barrel, up 0.08% on the day. Spot gold rose 0.13% to US$4,145.25 an ounce.

An executive order issued by Trump on the night of Oct 16 waived key Russia-related US sanctions and tariffs, including duties on the country’s goods and penalties for buying its oil and gas. However, Trump said on Oct 17 that he has yet to announce a final decision on the matter.

Inflationary pressures from elevated oil prices have put most major central banks on a tightening bias, though with a careful eye on whether economies are resilient enough to absorb higher interest rates. Recent comments from Federal Reserve officials, including Chair Kevin Warsh, suggest policymakers are in no rush to hike rates again.

The US Census Bureau is due to release September figures, with housing starts expected to rise to 1.305 million from 1.275 million in August, while building permits are seen at 1.395 million compared with 1.403 million.

European Central Bank (ECB) policymaker Martin Kocher is due to speak later on Oct 20, as well as ECB policymaker and Finnish central bank governor Olli Rehn. Bank of England Monetary Policy Committee member Megan Greene will deliver a speech at the London School of Economics.

Euro Stoxx 50 futures fell 0.71%, DAX futures slipped 0.40% and FTSE futures dropped 0.44%. S&P e-minis were flat at 7,734.25.

In cryptocurrencies, bitcoin gained 0.22% to US$82,117.01, and ether rose 0.63% to US$2,413.64. REUTERS