Most Asian stocks rose on Friday, after technology stocks fell the previous day, while the Indonesian stock market tumbled following a warning that the country's credit rating might be downgraded, raising growing concerns about capital outflows.
Index provider MSCI warned of the possibility of downgrading Indonesia from an emerging market, raising concerns about capital outflow from the country.
US stock futures rose slightly after Federal Reserve Chairman Kevin Warsh said that the artificial intelligence shock could bring significant benefits to the US and global economies, according to the Associated Press.
The South Korean KOSPI index jumped by 3.6 percent, after falling by 7.6 percent the previous day, affected by the decline in shares of artificial intelligence companies. Samsung Electronics shares rose by 4.2 percent, while shares of SK Hynix, which specializes in manufacturing memory chips, rose by 3.5 percent.
In Japan, the Nikkei 225 index rose by 1.9 percent to 65,658.59 points, after falling by 4.9 percent the previous day. The shares of SoftBank Group, which invests in Open AI, rose by 1.7 percent, and the shares of Tokyo Electron, which specializes in manufacturing chip production equipment, rose by 2.8 percent, and the shares of Kioxia Holdings, which manufactures memory chips, rose by 3.2 percent.
The rise in shares of Asian technology companies came after losses in artificial intelligence stocks in the United States diminished.
On Friday, during the meetings of the International Monetary Fund and the World Bank in Bangkok, Warsh stated that artificial intelligence may have broad positive impacts on global economies.
He said: “I believe that the emergence of this new technology is probably the most important transformation that the American and global economies will witness in my lifetime. “I believe it has tremendous benefits for the global economy and the American economy in the long term.”
In Taiwan, the TAEX index rose by 0.6 percent, benefiting from the artificial intelligence boom. On the other hand, Taiwan Semiconductor Manufacturing Company's shares fell by 0.4 percent, despite announcing record quarterly profits on Thursday and confirming the continued strength of demand related to artificial intelligence.
In Indonesia, the Jakarta Composite Index fell by more than 10 percent, recording its lowest levels in years, after MSCI announced that the country’s continued classification as an emerging market “is no longer appropriate.”
In Hong Kong, the Hang Seng Index rose by 1.2 percent to 24,353.69 points, while the Shanghai Composite Index rose by 1 percent to 3,742.66 points.
In Australia, the Standard & Poor's - ASX 200 index rose by 1.1 percent to close at 8,812.90 points, while the Indian Sensex index recorded slight gains of 0.2 percent.
On Wall Street on Thursday, the Standard & Poor's 500 index rose 0.3 percent, the Dow Jones Industrial Average rose 1.1 percent, while the Nasdaq Composite Index, which is dominated by technology stocks, increased 0.1 percent.
Losses in shares of artificial intelligence and electronic chip companies decreased during the session. The shares of the American company CoreWave, which specializes in cloud computing services for artificial intelligence, declined by 9.5 percent in early trading, before rising again and ending the session with gains of 5.9 percent. On the other hand, Nvidia shares closed down by 1.8 percent, after falling by 3.8 percent during the session. Broadcom shares also fell by 0.6 percent, and AMD shares fell by 1.5 percent.
Oil prices stabilized at high levels, in light of continued pressure on global supplies and the failure to reach an agreement between the United States and Iran to end the conflict.
In this context, the International Energy Agency announced on Thursday that member states had agreed to release the remaining quantity, amounting to about 100 million barrels of oil, as part of the pledge announced in March, explaining that the total quantities offered would exceed 400 million barrels, which was the volume that was originally planned.
The price of Brent crude, the global oil standard, fell by 0.4 percent to $105.46 per barrel, but remained much higher than its level of about $72 in late February, before the outbreak of war.
Oil prices still enjoy strong support in light of the uncertainty surrounding developments in the Middle East and fears of disruption to oil flows through the Strait of Hormuz. Warren Patterson and Eva Manthey, commodities strategists at ING Bank, said in a commentary on Friday that the market is pricing in a “significant risk premium.”
In the currency markets, the US dollar fell to 157.83 Japanese yen, compared to about 158 yen, while the euro rose to 1.1228 dollars, compared to 1.1220 dollars.
The dollar fell on Friday, heading towards recording its first weekly decline in five weeks, allowing the euro to recover from its lowest level in 17 months. This came in light of the turmoil affecting artificial intelligence investments and the decline in US bond yields, which limited the gains achieved by the dollar recently.
Shares of artificial intelligence companies witnessed a sharp decline this week, while pressure extended to parts of the credit market. Investors, who have pumped money into various parts of the artificial intelligence supply chain, are concerned that data center operators may not be able to make enough profits in time to repay their debts, according to Reuters.
These fears prompted investors to flock to US Treasury bonds, at a time when the yield on ten-year bonds is heading to record its largest weekly decline in more than a year, coinciding with the decline of the dollar, which had previously received support from the artificial intelligence boom and its positive impact on the US economy.
The dollar remained under pressure during Asian trading, falling to 157.85 yen, recording a weekly decline of about 0.3 percent. It also lost a similar percentage against the euro during the week, with the price of the single European currency reaching $1.1226 on Friday.
This improvement came at an appropriate time for the euro, which lost more than 3 percent of its value against the dollar during the past five weeks, amid concerns about worsening French debt and the possibility of an energy supply crisis during the winter.
With investors concentrated heavily in dollar buying positions, continued turmoil in the artificial intelligence sector may lead to the liquidation of these positions, which will increase pressure on the US currency and push it to decline further.
In this context, Brent Donnelly, President of Spectra Markets, said: “The dollar’s reaction to a serious reassessment of the capital spending boom in the field of artificial intelligence will be clearly negative for the US currency.”
He added: “If markets begin to take into account the possibility that capital spending on artificial intelligence will peak, the dollar will become a target for selling. The entire American economy appears to be based on only one pillar, which is the artificial intelligence sector.”
The dollar index, which measures the performance of the US currency against a basket of six major currencies, reached 101.89 points, heading towards recording a weekly decline of 0.2 percent.
The pound sterling rose slightly to $1.3303, achieving weekly gains of 0.5 percent, supported by data showing the British economy grew by 0.1 percent in August, contrary to expectations.
The New Zealand dollar also rose 0.5 percent to $0.5655, recording weekly gains of 0.7 percent.
As for the Australian dollar, it rose slightly to $0.6946, but recorded a weekly decline of 0.5 percent against the US dollar, contradicting the general trend. This performance came after the release of unexpected data showing weakness in the Australian labor market on Thursday, which prompted markets to reduce their expectations about the possibility of an additional hike in interest rates.
At the annual meeting of the International Monetary Fund in Bangkok, Kevin Warsh, an official at the US Federal Reserve, did not provide any significant indications about the path of monetary policy, only pointing out that global conditions have generally developed in line with expectations since the Federal Reserve’s meeting in September.
The Chicago Mercantile Exchange's Fed Watch tool showed that traders are 72 percent likely to keep interest rates unchanged later this month, compared to 53 percent a month ago.
Expectations for raising interest rates rose sharply following the release of consumer price index data, which came stronger than expected this week, but fell again after Federal Reserve officials indicated the possibility of the central bank waiting to obtain more clarity before making its decision at the next meeting.
Sim Moh Siong, strategist at OCBC Bank, said: “Estimates indicate that an extended correction in financing for the artificial intelligence sector may hinder the boom witnessed by the sector, which in turn may affect economic growth in the United States.”
Gold prices rose slightly on Friday as the dollar fell, but the precious metal remained on track for a slight weekly loss, as investors weighed the Federal Reserve's indicators on the path of interest rates.
By 04:33 GMT, gold rose in instant transactions by 0.2 percent to $4,177.82 per ounce, but it recorded a decline of 0.5 percent since the beginning of the week. US gold futures for December delivery also rose by 0.7 percent to $4,199.10, according to Reuters.
Kelvin Wong, chief market analyst at OANDA, said: “Gold remained moving within a price range, after earlier this week it touched the lower limit of this range at $4,075, while the upper limit reached $4,221.”
He added: “Inflationary pressures remain strong, as the core CPI and core producer price index data for September came above expectations.”
The US dollar is heading towards recording its first weekly loss in five weeks, which makes gold, priced in the US currency, less expensive for buyers who hold other currencies.
Producer prices in the United States last month recorded their largest rise in four and a half years, driven by increasing costs of goods and services, in the latest indication of expanding inflationary pressures to include a range beyond energy-related products.
This data came after the consumer price report issued on Wednesday, which showed inflation accelerating in September, due to a jump in gasoline costs.
According to the Chicago Mercantile Exchange's Fed Watch tool, traders are 28 percent likely that the Federal Reserve will raise interest rates later this month, while the odds of raising them in December reach 89 percent.
Austin Goolsbee, president of the Federal Reserve Bank of Chicago, said this week's stronger-than-expected inflation data was "disappointing." For her part, Beth Hammack, President of the Federal Reserve Bank of Cleveland, said that the central bank may have to raise interest rates more sharply if the public's inflation expectations witness a significant deterioration.
Although gold is considered an inflation hedge, rising interest rates reduce the attractiveness of the precious metal, which does not generate a return.
In India, several major mutual funds announced, in public statements issued late Thursday, the suspension of accepting large subscriptions for gold exchange-traded funds, ahead of the holiday season, which usually witnesses a rise in investor demand.
In other precious metals markets, silver rose in spot transactions by 0.7 percent to $57.81 per ounce, platinum rose by 1.1 percent to $1,642.75, while palladium increased by 1.5 percent to $1,143.46. However, all three metals tended to record weekly losses.
