Asian Stocks Mixed and Brent Falls More Than 1% as Alphabet, Microsoft and Amazon Earnings and Central Bank Decisions Loom

Since last week's tech selloff over AI spending, the market has carried that anxiety into a heavy calendar. Asian trading on Monday, Oct. 26, showed no relief. Futures readings were split.

Nasdaq 100 futures slipped 0.2% after the index posted a second straight weekly loss, according to Bloomberg. Other morning readings had U.S. futures edging slightly higher. A U.S. chip index logged its longest losing streak since November. Asian shares fell 0.1% and are down four straight weeks, the longest run since April, per Bloomberg's regional gauge.

Chips and AI names lead the Asian losses

Tokyo's Nikkei 225 fell 0.8% to 62,189.65. Advantest dropped 3.9% and Tokyo Electron lost 3.7%. SoftBank and Kioxia also fell.

Seoul's Kospi sank 1.5% to 5,469.47, with Samsung Electronics down 1.1%. Samsung and SK hynix are both due to report this week.

China and the rest of the region held up better. Hong Kong's Hang Seng rose 0.5% to 23,206.82. The Shanghai Composite gained 0.2% to 3,697.52, and Australia's S&P/ASX 200 added 0.2% to 8,809.90.

Oil retreats from a four-year high

Brent fell roughly 1.4% to 1.8% in early trading, depending on the quote. It traded around $115 after settling Friday at $116.72, up 3.1% on the day and the highest since June 2022. Brent was under $97 at the start of October. U.S. benchmark crude fell about 1.6% to 1.8% to roughly $101.

Friday's jump came on supply fears tied to the Middle East and Ukraine, with the northern hemisphere heading into winter. This morning's drop has erased only part of it.

President Trump added to the geopolitical uncertainty on Fox News on Sunday. "I have a decision to make: Do I finish it off, which would be very easy to do, or do I make a deal? That's all," he said of the war with Iran. A third aircraft carrier group has been sent to the region. Speculation has grown that he could escalate after the midterm elections on Tuesday, Nov. 3.

What Friday's close left behind

The Dow fell 1.24% to 52,220.21 on Friday. The S&P 500 lost 0.52% to 7,623.68 and the Nasdaq slipped 0.21% to 25,955.34. The S&P 500 has now had two straight weekly losses. Nearly three of every four S&P 500 stocks fell.

The damage was not confined to tech. Caterpillar dropped 2.4%. JPMorgan Chase and Citigroup each fell 1.5%, and Capital One slid 1%. American Express fell 3.7% despite a quarterly profit that beat analyst forecasts. The company announced its first major job cuts in roughly a decade.

Energy was the exception. Chevron rose 2.9% and ConocoPhillips gained 3.6%. Some AI-linked names also rose: Micron gained 2.5%, Intel and AMD each rose 1.7%, and Microsoft added 0.7%.

The 10-year Treasury yield edged up to 4.99% from 4.96% on Thursday. Gold slipped below $4,000, to around $3,985. It was near $4,140 on Oct. 21. Bitcoin was near $80,200, flat from Friday.

The AI spending test

Tesla and Meta results last week added to the worry. Tesla reported third-quarter capital spending of $4.73 billion against the $7.95 billion analysts expected, according to Bloomberg's compiled estimates. Meta raised its capital-spending outlook.

Stephen Innes of SPI Asset Management said Alphabet, Microsoft and Amazon "are about to walk on stage, and this is not one of those quarters where a company can simply beat the number, raise the guidance by a whisker and expect applause. Investors want proof now." He asked whether the compute buildout is "a durable earnings machine or just a shinier version of the same old capex furnace."

Angelo Kourkafas, senior global strategist at Edward Jones, said investors are focused on "the substantial upfront costs required to build AI infrastructure and the uncertainty around the timing of returns." Many AI companies have borrowed to fund the buildout, and high rates make those loans costlier.

BlackRock CEO Larry Fink offered the opposite argument on Oct. 21. "If we don't build out these data centers, it is actually more inflationary because the cost of compute is so high right now," he said on Bloomberg Television. Matt Orton of Raymond James Investment Management described "a tension in the market between the growth path of the AI names and the ability to finance the industry."

Elon Musk said Sunday that SpaceX completed $40 billion in GPU debt financing. Pricing terms remain unclear.

What comes next

Alphabet, Microsoft and Amazon report this week, along with SK hynix and Samsung. The Bank of Japan is due to announce its rate decision later in the week, alongside the Federal Reserve's meeting. Inflation remains stubbornly above 3%, and yields have been rising globally on government debt worries.

If the capital spending numbers fail to show returns, the weight of three of the market's most influential AI-related companies will pull on every index.