Asian markets presented a mixed picture on Tuesday, , as lingering concerns about artificial intelligence investments and geopolitical tensions continued to weigh on investor sentiment. While some indices showed gains, others remained subdued, reflecting a cautious approach amid ongoing uncertainty. The positive momentum seen earlier in the week appears to be moderating as investors digest a complex interplay of economic and political factors.
Supreme Court Ruling on Tariffs Provides Limited Relief
The relative calm on Wall Street following the Supreme Court’s decision to strike down President Trump’s sweeping tariffs, reported on , has not fully translated into widespread optimism in Asia. The S&P 500, Dow Jones Industrial Average, and Nasdaq composite all saw modest gains after the ruling, with the S&P 500 rising 0.7%, the Dow adding 230 points (0.5%), and the Nasdaq climbing 0.9%. However, analysts suggest the muted reaction was largely anticipated, as many market participants had already priced in the possibility of the court’s decision.
Despite the ruling, the threat of tariffs remains. President Trump indicated his intention to pursue alternative avenues for imposing taxes on imports, stating, “Just so you understand, we have tariffs, we just have them in a different way.” He announced plans to sign an executive order enacting a 10% global tariff under a law allowing for a maximum duration of 150 days, and also mentioned exploring additional tariffs through investigations conducted by the Commerce Department. This suggests a continued commitment to protectionist trade policies, even within the constraints of the legal system.
AI Concerns Dampen Tech Sector Performance
A significant drag on Asian markets is the growing anxiety surrounding investments in artificial intelligence. The reports highlighted concerns about the risks associated with massive AI investments, contributing to a decline in tech stocks. In Tokyo, the Nikkei 225 fell 1.2% to 56,797.22, with major banks and financial institutions experiencing particularly sharp declines. This was driven by worries over the potential impact of weakening private credit companies exposed to the risk of AI-driven disruption. Mitsubishi UFJ Financial Group, with its partnership with Blue Owl Capital, saw its shares drop 2.6% after Blue Owl lost 5.9% on Thursday.
Other major Japanese companies also felt the pressure, with Toyota Motor Corp. Falling 3.9% and Sony down 3.3%. The concerns extend beyond specific companies, reflecting a broader apprehension about the potential for AI to reshape industries and displace workers. This uncertainty is prompting investors to reassess valuations and adopt a more cautious stance towards tech-related investments.
Geopolitical Risks and Oil Prices
Adding to the market’s unease is the potential for conflict between the United States and Iran. Rising crude oil prices, fueled by both countries signaling preparedness for war if nuclear negotiations fail, are contributing to inflationary pressures and economic uncertainty. The ascent of crude prices is a key factor influencing market dynamics, as it impacts transportation costs, consumer spending, and overall economic growth.
Mixed Performance Across Regional Markets
The performance across Asian markets has been uneven. Hong Kong’s Hang Seng lost 0.6% to 26,544.62 upon reopening after the Lunar New Year holidays. Markets in mainland China and Taiwan remain closed until next week. South Korea’s Kospi bucked the trend, jumping 2.2% to 5,803.40, driven by gains in defense contractors like Hanwha Aerospace, whose shares soared 8.6% amid increased military spending globally. Australia’s S&P/ASX 200 edged down 0.1% to 9,075.70, while India’s Sensex added 0.2% and the SET in Bangkok lost 0.7%.
US Market Trends and Future Outlook
Thursday’s trading in the US saw the S&P 500 slip 0.3% to 6,861.89, the Dow Jones Industrial Average drop 0.5% to 49,395.16, and the Nasdaq composite lose 0.3% to 22,682.73. Booking Holdings experienced a significant decline. The initial dip in the S&P 500 was later recovered, closing in positive territory, demonstrating the market’s volatility and sensitivity to evolving news and data.
Looking ahead, the outlook for Asian markets remains uncertain. The combination of tariff threats, AI-related anxieties, and geopolitical risks creates a challenging environment for investors. While the Supreme Court ruling on tariffs provided a temporary reprieve, President Trump’s commitment to alternative trade measures suggests that trade tensions will likely persist. The impact of AI on various sectors will continue to be a key focus, and investors will closely monitor developments in the US-Iran situation. The holiday closures in key markets will likely contribute to lower trading volumes in the short term, potentially exacerbating price swings in response to significant news events.
The yield on benchmark U.S. 10-year notes remained flat at 4.054% on Wednesday, while the 30-year bond yield fell 0.4 basis points to 4.6788%. Analysts at NAB emphasized that “AI uncertainty remains a source of volatility, both in terms of the difficulty in assessing which AI companies will be the winners and losers but also what sort of impact will AI have in other companies and sectors of the economy.”
