Shares in Asia experienced a downturn on Friday following declines in major technology stocks that impacted Wall Street. Despite U.S. futures showing slight increases and oil prices climbing, regional markets reflected a cautious sentiment.
Japan’s Nikkei 225 index was particularly hard hit, initially dropping over 2% before settling to a 1.6% decrease, landing at 50,064.38. The trading backdrop was influenced by recent data from China, revealing a 1.1% contraction in exports for October, exacerbated by a significant 25% drop in shipments to the United States compared to last year. However, some economists anticipate a rebound in Chinese exports after U.S. President Donald Trump and Chinese leader Xi Jinping reached an agreement to ease trade tensions last week.
In Hong Kong, the Hang Seng index fell by 0.9% to 26,247.36. Meanwhile, the Shanghai Composite index remained nearly unchanged at 4,007.45. South Korea’s Kospi experienced a sharper decline of 2.2%, closing at 3,937.22, and Taiwan’s Taiex decreased by 0.7%. Australia’s S&P/ASX 200 also saw a dip, falling 0.8% to 8,761.10.
The technology sector, a significant driver of market fluctuations this week, contributed to Wall Street’s struggles. On Thursday, the S&P 500 declined by 1.1% to 6,720.32, the Dow Jones Industrial Average dropped 0.8% to 46,912.30, and the Nasdaq Composite fell 1.9% to 23,053.99. Notably, Nvidia’s stock slid 3.7%, and Microsoft fell by 2%. Amazon also faced challenges with a 2.9% decline.
On a different note, Elon Musk gained approval in a shareholder vote that could potentially award him stock valued at $1 trillion if specific performance targets are met over the next decade. Although Tesla’s shares, up 80% this past year, initially fell, they rebounded in after-hours trading to close at $445.91.
Wall Street is closely scrutinizing corporate earnings and forward guidance, hoping to gain insights into the economic landscape amidst an absence of broader economic data due to an ongoing government shutdown. Among the notable declines was DoorDash, which plummeted 17.5% after warning investors of increased product development expenses for the upcoming year. CarMax suffered a 24.3% drop following a disappointing financial update and the announcement of CEO Bill Nash’s departure in December. Conversely, software firm Datadog surged 23.1% after surpassing analysts’ earnings estimates, and Rockwell Automation rose 2.7% with strong results.
Despite a generally record-setting year for the stock market, concerns abound regarding potential overvaluation, particularly among leading technology firms that have fueled market growth, especially in the wake of advancements in artificial intelligence.
This week’s earnings reports are pivotal in determining whether the lofty valuations in the market are warranted. Meanwhile, the ongoing government shutdown continues to affect the flow of vital economic data, with the latest unemployment reports being withheld. Notably, a report from outplacement firm Challenger, Gray & Christmas highlighted a 175% surge in U.S. job cuts compared to last year, attributing this trend to diminished consumer and corporate spending, rising costs, and increasing automation.
The impact of the shutdown is being felt across various sectors, particularly in airlines, as the Federal Aviation Administration announced a 10% reduction in air traffic starting Friday across 40 high-traffic markets. Stocks of major airlines, including American Airlines, Delta Air Lines, and United Airlines, saw declines of 2%, 1.2%, and 1%, respectively.
In Europe, markets fell on Thursday after the Bank of England opted to maintain its key interest rate. However, Asian markets saw some positive closure on the same day, indicating a mixed global outlook.
As for commodities, U.S. benchmark crude oil prices increased by 35 cents to $59.78 per barrel, while Brent crude rose by 36 cents to $63.74. The U.S. dollar strengthened against the Japanese yen, rising to 153.35 yen, while the euro slipped to $1.1534 from the previous figure of $1.1546.
