SYDNEY: Asian shares gave up earlier gains on Thursday (Oct 29) as AI-related earnings announcements prompted wildly mixed responses, raising the stakes for Amazon and Intel results due later in the day.
Hefty cash burn from Alphabet sent its shares 10 per cent lower in after-hours trading, wiping nearly US$400 billion off its market value. That drove Nasdaq futures 1 per cent lower. Microsoft, by contrast, beat forecasts with better-than-expected cash flows that lifted its shares by 3 per cent.
Overnight, the Federal Reserve held interest rates steady as widely expected, but two committee members voted for a hike. Chair Kevin Warsh struck a more confident note on the inflation outlook during his press conference, sparking a rally in Treasuries.
However, the bigger test came from earnings. Samsung Electronics said on Thursday its operating profit rose nearly ninefold to a record high in the third quarter, driven by robust demand for AI chips. Its shares still slid more than 4 per cent and dragged the broader KOSPI index down 2.6 per cent after a nearly 7 per cent surge a day earlier.
MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.7 per cent, while Japan’s Nikkei trimmed gains to be up 0.3 per cent.
Mainland China’s blue chips fell 0.9 per cent and Hong Kong’s Hang Seng index rose 0.2 per cent.
“The reason why Alphabet is down is because their traditional revenue service of ad generation has been impacted by the very thing which is the AI boom. So it’s causing a mix of results for Google,” said Jamie Hannah, deputy head of investments at VanEck.
“Both of Alphabet and Microsoft confirmed that the AI revenue generation is still solid. We saw that through the data center growth, the cloud services. So that part of the business is solid, which then flows into a lot of the information coming out of Asia with SK Hynix yesterday as well in Korea.”
Shares of SK Hynix rose 1.3 per cent after jumping 11 per cent a day earlier on strong earnings.
CENTRAL BANK FEST CONTINUES
After the Fed held interest rates steady, all eyes are on US Personal Consumption Expenditures data for September, the Fed’s preferred gauge of inflation. Forecasts are centred on a 0.3 per cent monthly rise in the core measure, picking up from a 0.2 per cent gain the previous month.
Markets are still 80 per cent priced for a rate rise in December despite dovish comments from Warsh, which led to a steepening of the Treasury yield curve. The 2-year Treasury yield fell 6 basis points overnight and was last flat at 4.6933 per cent.
“The dissenting votes to hike rates at today’s meeting could be interpreted as being not about whether the Fed hikes again, but when,” said Kerry Craig, global market strategist at JP Morgan Asset Management.
“With policy tightening already being priced in, this implies that yields will remain range-bound unless there is a clearer signal for more aggressive policy tightening or a pivot to cuts,” he said.
The Bank of Canada hiked interest rates on Wednesday for the first time in more than three years and warned of further increases. The European Central Bank is, however, expected to hold interest rates steady later on Thursday.
In the currency markets, the dollar was steady against its major peers after a 0.2 per cent dip overnight. The kiwi was nursing heavy losses at US$0.5626, having slid 1 per cent overnight as its central bank shocked markets by leaving interest rates steady on Wednesday.
Brent crude futures fell 0.4 per cent on Thursday to US$114.91 a barrel after the Wall Street Journal reported US Vice President JD Vance sent a letter to Iranian Security Council chief Mohsen Rezaei in an effort to revive peace negotiations.
