GLOBAL MARKETS: Asia markets tumble as tech rout deepens

Asian stocks tumbled on Monday as investors pulled back from the artificial intelligence (AI)-driven market rally, while escalating tensions in the Middle East pushed oil prices and the U.S. dollar higher.

South Korea's technology-heavy KOSPI index plunged 8%, triggering a 20-minute trading halt. The benchmark is now down nearly 17% from the record high it reached last week.

Japan's Nikkei index also declined, falling 3.5% in early trading. Meanwhile, U.S. stock futures showed modest gains, with futures tied to the S&P 500 and Nasdaq 100 edging higher.

The sharp market sell-off follows a 4.2% drop in the Nasdaq on Friday, led by losses in semiconductor stocks. A stronger-than-expected U.S. jobs report fueled expectations that the Federal Reserve could continue raising interest rates, dampening enthusiasm for AI-related investments that had fueled a weeks-long rally.

U.S. Treasury yields climbed after the jobs data, with two-year Treasury yields rising more than 11 basis points on Friday. Benchmark 10-year Treasury futures were slightly lower during Asian trading on Monday.

Bob Savage, head of markets macro strategy at BNY, said investors are reassessing the narrative that AI would continue to drive market gains.

"The AI-drives-everything narrative frayed last week," Savage said.

He noted that investors are debating whether the recent pullback represents a healthy pause in the market's nine-week rally or signals a more significant downturn. He added that growing attention on upcoming initial public offerings (IPOs), including SpaceX and Anthropic, may also be influencing investor sentiment.

Attention this week is focused on several major economic events, including U.S. consumer inflation data due on Wednesday and central bank meetings in Canada and Europe.

The highly anticipated SpaceX IPO is expected to be priced on Thursday and begin trading on Friday. Analysts expect it to be followed by other major listings, including Anthropic and OpenAI, raising concerns that the large capital requirements of these offerings could draw funds away from other assets.

Cryptocurrency markets also remained under pressure. Bitcoin hovered just below $63,000 after recording its steepest weekly decline since the collapse of crypto exchange FTX in late 2022, falling approximately 16% over the past week.

Meanwhile, geopolitical tensions in the Middle East continued to support oil prices. Brent crude futures rose about 2.6% to $95.45 per barrel after an Israeli strike on Beirut prompted Iran to launch missiles toward Israeli targets.

Adding to the market's focus on energy, OPEC+ agreed on Sunday to increase oil production targets for the fourth consecutive month.

In currency markets, the U.S. dollar remained strong, holding above 160 Japanese yen. The Australian dollar traded at $0.7038, while the euro hovered around $1.1518.

-Reuters