Asian stocks were set to extend their losses from Tuesday following a substantial tech-led selloff on Wall Street, which intensified worries that the AI-fueled equity rally has become overextended. Equity-index futures for Japan and South Korea registered declines, although Hong Kong contracts showed modest gains. This downturn comes after the tech-heavy Nasdaq 100 plunged 3.3% and the S&P 500 fell 1.4% on Tuesday. A closely watched semiconductor gauge, which had more than doubled from its war-driven lows, experienced approximately an 8% slump.
The widespread risk aversion prompted investors to move into safer assets. Treasuries saw a rally, and haven currencies like the Japanese yen and Swiss franc outperformed. Additionally, oil prices declined on Tuesday, influenced by increased visibility of tanker traffic through the Strait of Hormuz following an interim peace agreement between the United States and Iran.
This market volatility occurred as markets are preparing to conclude the first half of the year, which has been characterized by significant gains fueled by easing geopolitical tensions, robust earnings, and a resurgence in AI-related trading. However, this advance has recently faltered amidst growing questions regarding whether the substantial spending commitments by technology companies will yield sufficient returns.
