Asian Stocks to Fall, Oil Rises as US Strikes Iran: Markets Wrap

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(Bloomberg) — Asian stocks were poised for losses on Thursday as a tech-led selloff on Wall Street and rising oil prices fueled by renewed Middle East tensions weighed on sentiment.

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Equity-index futures for Japan, Australia and South Korea pointed to declines, putting a regional gauge of stocks on track for a second straight day of losses. US equity futures slipped after the S&P 500 Index fell 1.6% and the Nasdaq 100 Index slid 2%, marking the first back-to-back declines of at least 1% for the tech-heavy gauge since March.

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Shares of chipmakers and other AI infrastructure companies, this year’s biggest winners, fell for a second day. Chip bellwether Nvidia Corp. dropped 3.7%, Broadcom Inc. dropped 5.1% while Super Micro Computer slid 28% after unveiling plans for a $7 billion equity raise. Oracle Corp. shares slipped in extended trading after the reporting quarterly capital expenses that were higher than estimates.

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US crude extended gains in early Asian trading after jumping about 2% on Wednesday as fresh US strikes on Iran heightened concerns about supply risks. The military action followed President Donald Trump’s warning that Iran would “pay the price” for delaying negotiations on an interim peace deal.

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The flare-up in Middle East tensions overshadowed a softer-than-expected US inflation report that had offered some relief to investors. Equities remained under pressure as resilient economic data has led traders to pare bets on Federal Reserve rate cuts, extending a rotation out of the technology stocks that had driven markets higher for most of the year.

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“Investors remain skittish despite being thrown a lifeline by the inflation figures,” said Chris Beauchamp, chief market analyst at IG. “It is now a case of ‘once bitten, twice shy’ – no one wants to go charging in to buy the dip yet, which suggests more of a drift lower for the time being, though leaving the overall trend intact.”

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Elsewhere, gold extended declines on Wednesday to drop 4.4%, while a gauge of the dollar was mostly flat.

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The core consumer price index, which excludes food and energy prices, increased 0.2% from April, under the 0.3% consensus forecast among economists polled by Bloomberg.

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Bond traders maintained bets that the Fed will raise interest rates by the end of the year. While Treasury yields initially dipped after the data on Wednesday, they resumed climbing with oil prices later in the session. Interest-rate swaps showed traders are still fully pricing in a rate hike by December.

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“It’s clear that rate cuts are off the table, and while there is chatter about a potential rate hike, we believe it’s unlikely that we’ll see a rate hike before the midterm elections,” wrote Skyler Weinand, chief investment officer at Regan Capital.

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Investors were also bracing for a wave of equity issuance unlike anything seen in recent history. Companies racing to fund artificial-intelligence investments are seeking to raise vast sums, raising questions about whether demand can absorb the supply and what it may mean for valuations.