(Sharecast News) - Asia-Pacific equities fell sharply on Friday as a global selloff in artificial intelligence-linked stocks accelerated and fading expectations of a December US rate cut dented sentiment.
Tech shares across the region slumped after Wall Street reversed early gains, with Oracle and AMD turning negative and Nvidia erasing advances to close nearly 3% lower.
Patrick Munnelly at TickMill said global markets were "bracing for their roughest week in seven months as investors retreat from riskier assets amid concerns over lofty valuations and uncertainty surrounding the payoff of massive AI investments."
Stronger-than-expected US jobs data led traders to scale back bets on imminent policy easing, with the CME FedWatch Tool showing only about a 40% chance of a quarter-point cut next month.
The shift in rate expectations added to volatility ahead of key US economic releases, with Munnelly noting that "uncertainty over the Federal Reserve's next move on interest rates continues to linger, with policymakers warning against easing monetary policy too hastily."
Tokyo leads regional declines again
Japan's markets led regional declines, hit by steep losses in heavyweight technology stocks.
The Nikkei 225 dropped 2.4% to 48,625.88, as SoftBank tumbled 10.9% and chip-related names Mitsui Kinzoku and Advantest plunged 12.28% and 12.1% respectively.
Tokyo Electron fell more than 7%, Lasertec lost over 5% and Renesas dropped 2.65%.
The Topix edged down 0.06% to 3,297.73.
Fresh data showed Japan's core inflation climbed 3% in October, matching expectations and reinforcing the case for Bank of Japan tightening, while the core-core rate rose to 3.1% amid easing rice inflation.
Munnelly said investor sentiment in Asia remained "gloomy, weighed down by ongoing fears of overinflated valuations and concerns about excessive spending in the tech sector," while noting that Japan also "grabbed attention as prime minister Takaichi's cabinet unveiled the largest additional spending package since the pandemic began," with the yen holding steady after the JPY 17.7trn plan was announced.
BoJ Governor Kazuo Ueda warned lawmakers that yen weakness risked pushing up import-driven price pressures, and finance minister Satsuki Katayama signalled concern over "one-sided, sharp moves" in the currency.
China, Hong Kong stocks also weaker
Mainland Chinese stocks also weakened, with the Shanghai Composite down 2.45% to 3,834.89 and the Shenzhen Component sliding 3.41% to 12,538.07.
Battery and materials names led losses, including Ningbo Ronbay New Energy Tech, which slumped 11.99%, Nuode Investment, down 10.05%, and Veken Elite, off 10.04%.
In Hong Kong, the Hang Seng Index shed 2.38% to 25,220.02, dragged lower by declines in JD Health International, Xinyi Solar Holdings and Link REIT, which fell 8.6%, 7.51% and 7.47% respectively.
Munnelly said Asian stocks had "marked their worst week since April," mirroring a global derisking that has swept across major asset classes, including cryptocurrencies, with Bitcoin "acting like the canary in the coal mine."
South Korea's Kospi sank 3.79% to 3,853.26 amid broad-based weakness in industrial and biotech stocks.
SBW plunged 19.53%, LS Industrial Systems dropped 12.85% and Pharmicell declined 11.23%.
Sydney bourse falls despite expansion in business activity
In Australia, the S&P/ASX 200 fell 1.59% to 8,416.50, with sharp losses in Lovisa Holdings, Iluka Resources and IperionX, which dropped 13.79%, 11.55% and 9.57% respectively.
Fresh PMI data showed Australian business activity expanding at its fastest pace in three months, with the composite output index rising to 52.6 in November from 52.1 in October.
S&P Global's Jingyi Pan said stronger new business growth and improved confidence pointed to continued near-term expansion, though the Reserve Bank of Australia faced constraints from weak productivity and persistent inflation pressures.
Munnelly noted that risk-off sentiment across global markets had intensified, with the MSCI All Country World Index sliding more than 3% this week and heading for its worst weekly performance since April, underscoring the pressure on equities in every major region.
New Zealand's S&P/NZX 50 edged down 0.15% to 13,419.40, weighed by declines in Infratil, Eroad and Investore Property, which dropped 3.35%, 3.25% and 2.83% respectively.
In currency markets, the dollar weakened 0.53% against the yen to JPY 156.63, rose 0.24% on the Aussie to AUD 1.5564, and was little changed against the Kiwi at NZD 1.7901.
Oil prices extended recent losses, with Brent crude futures last down 2.18% on ICE at $62.00 per barrel, and the NYMEX quote for West Texas Intermediate falling 2.49% to $57.53.
Munnelly said oil was "under pressure" and "expected to slide over 2% this week," noting it was trading below $63 a barrel as geopolitical developments converged with sanctions on major Russian producers.
Reporting by Josh White for Sharecast.com.
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