Asia Slips as AI Funding Fears Persist; Oil Slide Lifts Bonds and U.S. Futures

Asia Slips as AI Funding Fears Persist; Oil Slide Lifts Bonds and U.S. Futures

Tokyo leads the slide, Hong Kong shut

Asian equities began the week lower on Monday, carrying Friday's technology selloff into a new session, while a retreat in crude prices propped up sovereign bonds and U.S. equity futures. Japan's Nikkei 225 fell 1,411.20 points, or 2.16%, to 63,913.09 in the first 15 minutes of trading, Kyodo News reported. The index was down as much as 2.3% during the morning and sat roughly 10% below its October 6 record of 70,683.98, according to Bloomberg. The broader Topix lost 1.17%. Hong Kong's exchange was closed for the Chung Yeung holiday, thinning regional liquidity and helping cap the region's overall decline.

Seoul opens sharply lower, then trims losses

South Korea's Kospi opened at 5,488.41, down 3.17% from Friday's close, before bargain hunting pulled it back to 5,594.27 by 9:14 a.m. local time, a loss of 1.30% (The Asia Business Daily). Reuters put the Korean benchmark down 1.6% in its snapshot. Samsung Electronics and SK Hynix each fell more than 4% before paring losses, Bloomberg reported. Korea's index shed more than 14% last week and Japan's lost 5.4%, Reuters said, making both markets the epicenter of the global retreat from the AI trade.

Shanghai and Taipei fall more gently

Taiwan's Taiex dropped 1.5% and the Shanghai Composite slipped 0.55%, the Wall Street Journal reported, while MSCI's broadest Asia-Pacific index outside Japan eased 0.3% (Reuters). The milder losses on the mainland partly reflected Chinese data published the same morning.

China's 4.5% growth beats forecasts

China's economy grew 4.5% year on year in the third quarter, the National Bureau of Statistics said, above the 4.4% forecast in a Reuters poll and up from 4.3% in the second quarter, which had been a more than three-year low. Growth was 1.2% quarter on quarter versus 1.1% expected. For the first nine months, output expanded 4.6%, inside Beijing's 4.5% to 5% target. September retail sales rose 1.1% and industrial output 5.5%, both faster than in August, while property investment fell 20.6% in January-September (InvestingLive, Reuters). Analysts cautioned that momentum remained soft: adjusted for inflation, real retail sales barely grew from a year earlier.

Washington waives Russian oil sanctions

The day's main relief came from oil. President Donald Trump signed an executive order late Friday waiving sanctions and tariffs on Russian energy under the Lindsey Graham Act, arguing the move was in the national interest (NBC News, CBS News). Secretary of State Marco Rubio said Saturday that Trump would take up to 60 days to assess the economic impact. Tariffs of up to 100% on the five largest buyers of Russian crude and gas had been due to take effect on Sunday.

Brent slips, but Hormuz risk persists

Brent crude fell 1.7% to $107.95 a barrel in Asian trade and U.S. crude lost 0.8% to $100.62 (Reuters), after Brent settled Friday at its highest since May 19 following a jump of almost 4%. Supply risks have not disappeared: Iran's Revolutionary Guards said another tanker exploded after hitting a mine in the southern Strait of Hormuz, a claim that could not be independently verified.

Bonds and U.S. futures find support

Cheaper oil eased inflation expectations and extended a rally in government debt. The 10-year Treasury yield fell 3 basis points to 5.0645%, after its largest weekly drop in more than eight months (Reuters). S&P 500 futures added 0.5% and Nasdaq futures 0.8%. The euro slipped 0.2% to $1.1212, near last week's 16-month low of $1.1113, as violent protests in France weighed on the currency; the dollar eased 0.1% against the yen to 157.75. Euro Stoxx 50 futures were 0.4% lower.

The real story is AI financing

Friday's losses were about funding, not demand. The Nasdaq Composite fell 2.1%, ending the week down 4.5%, its worst since June, while the S&P 500 lost 1.1% on the day and 1.95% on the week (AP, WSJ). Investors worry that AI infrastructure will have to be written down as it ages, and that rising government yields and wider credit spreads are making the build-out harder to finance. "Investors have long worried that AI revenues won't be sufficient to recoup the massive upfront investment," My Bui, an economist at AMP, told Reuters.

Chipmakers face a second front

Memory and equipment names took the brunt. China's DeepSeek released its V4.1-Flash-1017 model on October 17, saying it needs four times less memory per token, which revived fears that cheaper models will curb demand for high-end memory and data centres (fnnews, NewsBytes). Korean brokerages have pushed back, arguing that Chinese AI chip demand will outstrip supply this year and recommending investors buy the dip. Retail investors' reliance on borrowed money in Seoul has climbed to a three-month high, according to The Korea Herald, leaving that leverage exposed if volatility returns.

What to watch this week

About 70 S&P 500 companies report results this week: Netflix and General Motors on Tuesday, then Meta, Tesla, IBM, Texas Instruments, Lam Research and SAP on Wednesday (CNBC). Their numbers will test the argument that AI spending is converting into revenue. Also on the radar: China's monthly data, the 60-day review of Russian oil sanctions and shipping risk in Hormuz. Korea's Financial Services Commission held an emergency meeting on October 15 and said contingency plans could be activated if needed (Seoul Economic Daily).