Asia stocks slide as AI caution dents tech; Japan battered by fiscal concerns

Updates with India open, turn in U.S. futures, and Japan context 

Investing.com-- Most Asian stocks fell on Tuesday, tracking overnight declines on Wall Street as investors offloaded technology shares ahead of key earnings from artificial intelligence bellwether Nvidia this week.

Japanese markets were the worst performers for the day, falling sharply amid a growing sell-off in long-dated government bonds on concerns over how Prime Minister Sanae Takaichi will fund her expansionary fiscal policies. 

A continued diplomatic rift between Tokyo and Beijing also rattled Japanese stocks. 

Regional markets took a weak lead-in from Wall Street, where sectors apart from tech were also pressured by decreasing confidence that the Federal Reserve will cut interest rates in December.

Caution over a long-delayed nonfarm payrolls reading for September, due on Thursday, also weighed.

S&P 500 Futures reversed course and slid 0.4% in Asian trade, cutting short a brief recovery. 

Japan’s Nikkei 225 slides 2% as fiscal concerns grow 

Japan’s Nikkei 225 and TOPIX indexes slid more than 3% and 2%, respectively. 

Japanese markets were spooked by longer-term Japanese government bond yields soaring to multi-decade highs, amid a growing rout in bond prices. 

Japan’s 30-year government bond yields surged 1.8% and were close to record highs, while the 20-year bond yield jumped 1.4% to a record high. 

Selling in the bond market came as Takaichi’s administration prepares to release its first ever spending package, which could be revealed as soon as this week. 

Data showing a sharp third-quarter contraction in the Japanese economy fueled bets that Takaichi will dole out even more spending to support the economy. Media reports showed that Takaichi was also considering tax cuts to boost private spending. 

Higher yields make it more difficult for governments to issue debt, while increased bond selling by investors signals waning faith in government debt. 

A persistent diplomatic rift between Tokyo and Beijing, over Takaichi’s comments on military action in Taiwan, also rattled Japanese markets.

Film and animation stocks, including giants Toei Co Ltd (TYO:9605) and Toho Co., Ltd. (TYO:9602), fell sharply on Tuesday following reports that China had blocked the release of some upcoming Japanese movies. 

Asia tech slides ahead of Nvidia earnings

Tech-heavy Asian bourses clocked steep losses on Tuesday, with South Korea’s KOSPI down 3.3%, while Hong Kong’s Hang Seng shed 1.9%. 

Losses in tech also pressured Japanese markets, with conglomerate SoftBank Group Corp. (TYO:9984) down nearly 6%.

In South Korea, chipmakers Samsung Electronics Co Ltd (KS:005930) and SK Hynix Inc (KS:000660) fell 1.5% and 4%, respectively, while in Hong Kong, Xiaomi Corp (HK:1810) fell over 3% before its third-quarter earnings.

Concerns over stretched tech valuations grew before quarterly earnings from artificial intelligence major NVIDIA Corporation (NASDAQ:NVDA), which are due on Wednesday. 

Nvidia’s earnings come as several major hedge funds and investors trimmed or slashed their holdings in the firm, amid growing concerns over an AI-fueled valuation bubble. Nvidia, the world’s most valuable listed company, is at the heart of this valuation boom over the past three years. 

Losses in tech spilled over into non-tech bourses as well, albeit at a smaller scale. China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes, which have a relatively smaller weightage of tech stocks, fell 0.2% and 0.6%, respectively. 

Australia’s ASX 200 slid 2.2%, hit by losses in heavyweight banks and mining stocks after the minutes of the Reserve Bank of Australia’s November meeting showed the central bank remaining largely cautious over cutting interest rates further. 

Singapore’s Straits Times index shed 0.4%, while  India’s Nifty 50 index fell 0.5% in morning trade.