BY COMFORT OGBONNA
Global stock markets came under heavy pressure on Friday as a broad selloff in semiconductor shares spread across Asia and weighed on investor sentiment worldwide. Renewed conflict in the Middle East and rising oil prices added to market uncertainty, prompting investors to move away from riskier assets while seeking safer investments.
Technology stocks led the decline, with chipmakers suffering some of the steepest losses as investors questioned whether the artificial intelligence-driven rally that has powered markets this year can continue at its current pace.
MSCI’s broad index of Asia-Pacific shares outside Japan dropped more than 2%, while Japan’s Nikkei 225 plunged nearly 6%, reflecting widespread selling across the region’s technology sector.
The weakness was also evident in U.S. and European futures markets. Nasdaq futures fell 1.5%, S&P 500 futures declined 0.9%, EURO STOXX 50 futures slipped 1.1%, and Germany’s DAX futures lost 0.85%, pointing to a weaker start for major Western markets.
Taiwan’s stock market, home to some of the world’s largest semiconductor companies, suffered one of the biggest declines, with its benchmark index falling 5.7%. Trading in South Korea was closed for a public holiday, limiting regional activity.
The selloff reflected growing concerns that semiconductor valuations have risen too quickly after months of strong gains fueled by the rapid expansion of artificial intelligence technologies. Investors have increasingly shifted money away from chip stocks and into sectors viewed as more defensive or offering stronger near-term earnings visibility, including banking stocks, following solid financial results from major lenders.
Adding to concerns, South Korean authorities announced new measures designed to reduce volatility in technology-related investments. Regulators said they would temporarily suspend the launch of new exchange-traded funds (ETFs) linked to certain major technology companies while also increasing minimum deposit requirements for retail investors seeking exposure to those products.
Chinese markets also weakened significantly. The CSI 300 Index fell 2.45%, while Hong Kong’s Hang Seng Index declined 2%, with technology companies accounting for much of the losses.
Analysts at HSBC said investors are beginning to reassess the long-term outlook for the artificial intelligence investment cycle after an exceptionally strong rally earlier this year.
“Asia’s AI trade thesis is being tested again,” HSBC analysts said, noting that concerns have resurfaced about whether the rapid expansion of AI infrastructure could eventually lead to excess capacity.
The analysts added that while questions remain about how long the current AI investment cycle can continue, the underlying business fundamentals for the sector remain generally positive.
At the same time, geopolitical developments continued to weigh on global markets.
Oil prices extended their recent rally after Iran announced fresh attacks on U.S. facilities in the Gulf following a sixth consecutive night of American strikes on Iranian military targets. The latest exchange of attacks has further weakened the fragile ceasefire reached last month and increased fears of a broader regional conflict.
Brent crude futures rose 1% to $85.09 per barrel, while U.S. West Texas Intermediate crude gained 1.2% to $79.90 per barrel.
For the week, both Brent and WTI crude were on track to gain more than 11%, marking their strongest weekly performance since April.
Analysts warned that continued fighting could threaten key energy infrastructure and further disrupt global oil supplies.
“The U.S. and Iran are further away from seeing eye-to-eye,” said Thierry Wizman, global foreign exchange and rates strategist at Macquarie.
He added that the coming days could determine whether either side escalates the conflict further, increasing the possibility that critical oil production or transportation facilities could become targets.
Markets were also watching renewed trade tensions after the United States announced new 25% tariffs on imports from Brazil, adding another source of uncertainty for global investors already dealing with geopolitical risks and economic concerns.
In currency markets, the U.S. dollar remained relatively stable and was on track to finish the week largely unchanged. Expectations for Federal Reserve interest rate increases have eased following softer U.S. inflation data, but renewed demand for safe-haven assets helped support the currency.
Financial markets are currently pricing in approximately 27 basis points of additional Federal Reserve rate increases by December, reflecting a more moderate outlook after recent consumer and producer inflation reports showed signs of easing price pressures.
The euro slipped slightly to $1.1436, while the British pound traded at $1.3459.
The Japanese yen remained under pressure, hovering near its weakest level in four decades at approximately 162.41 per U.S. dollar. The currency’s continued weakness prompted renewed comments from Japanese Finance Minister Satsuki Katayama, who reiterated the government’s concern over excessive currency movements.
Investors are also paying close attention to potential changes in investment strategy by Japan’s Government Pension Investment Fund (GPIF) and other major pension funds after government officials indicated they want to significantly increase investment in domestic assets.
Daiju Aoki, regional chief investment officer for Japan at UBS Wealth Management, said expectations of increased domestic investment could temporarily support Japanese stock prices and government bond markets.
However, he cautioned that any market rally unsupported by economic growth and corporate earnings would likely prove difficult to sustain over the longer term.
Meanwhile, gold, traditionally viewed as a safe-haven asset during periods of uncertainty, rose 0.3% to $3,981.44 per ounce as investors sought protection from rising geopolitical tensions and increased market volatility.
With semiconductor stocks under pressure, oil prices surging, and geopolitical risks intensifying, investors are expected to remain cautious as they assess whether the global AI-driven market rally can withstand mounting economic and political challenges.
Original article
Comments