U.S. futures and Asian shares experienced significant declines on Monday, with oil prices dropping more than $2 a barrel. Concerns resurfaced regarding a possible market bubble related to the artificial intelligence (AI) craze, particularly impacting South Korea's stock market.
The South Korean Kospi index plummeted 4.6% to 4,982.54, with major tech companies such as Samsung Electronics and SK Hynix suffering substantial losses of 3.5% and 5.6%, respectively. This downturn came after weeks of record-setting performances in the Kospi, driven by tech giants entering into lucrative partnerships with AI leaders like Nvidia.
In terms of precious metals, gold prices fell by 1%, while silver saw an increase of over 2%, following a plunge the prior Friday that marked the end of record surges in the precious metals market.
Market anxiety was fueled as investors scrutinized President Donald Trump’s new nominee for the Federal Reserve, Kevin Warsh, and the implications for future interest rates. U.S. futures for the S&P 500 dropped 0.9%, and those for the Dow Jones Industrial Average fell by 0.5% as well.
U.S. benchmark crude oil prices decreased by $2.80, bringing the price to $62.41 per barrel. During a press briefing aboard Air Force One, Trump stated that Iran should negotiate a satisfactory deal to prevent nuclear weapons development. His comments seemed to alleviate some concerns regarding potential disruptions to oil supplies, which had previously caused prices to increase. Consequently, Brent crude also fell, down $3 to $66.32 per barrel.
In Japan, the Nikkei 225 index managed a slight uptick of 0.2%, closing at 53,422.01, although other regional indexes retreated. The Hang Seng index in Hong Kong declined 2% to 26,841.45, while the Shanghai Composite index fell by 1.1% to 4,071.14. In Australia, the S&P/ASX 200 also decreased by 1.1%, closing at 8,766.70, and Taiwan's Taiex fell 2.1%.
The previous Friday saw the S&P 500 drop 0.4% to 6,930.03, while the Dow lost 0.4% to close at 48,892.47, and the Nasdaq composite decreased by 0.9% to 23,461.82. Despite the broader market losses, Tesla shares rose by 3.3%, rebounding after a prior drop due to better-than-expected quarterly profit reports.
Apple also gained 0.5% following stronger-than-expected profit reports for the latest quarter. However, Warsh’s nomination is contingent on Senate approval, and the future actions of the Fed under his leadership could greatly influence both the U.S. economy and global markets. The Fed's decisions on interest rates have far-reaching impacts on asset prices, and there is concern that political influences could undermine the Fed's independence.
A report released last Friday indicated that U.S. wholesale inflation was higher than economists anticipated, potentially leading the Fed to maintain steadier interest rates for a while rather than implementing cuts. This environment has led to market fears that the Fed might lose some of its autonomy under Trump's presidency.
Consequently, gold prices saw a significant drop of 11.4%, settling at $4,745.10 per ounce, following a year of impressive gains that had seen gold prices effectively double. At one point, gold surpassed $5,000 for the first time on Monday and reached close to $5,600 on Thursday. Silver also faced a drastic decline, plunging 31.4%.
During early trading on Monday, the dollar rose to 155.10 Japanese yen from 154.94 yen, and the euro increased to $1.1867 from $1.1853. Overall, the financial markets remain volatile amid economic uncertainties and geopolitical tensions.
