Asia stocks give up gains as Fed hike bets lift the dollar and yields
Global stocks gave up early gains on Friday after Nvidia's leadership crisis, as US yields climbed and investors priced a 13% chance of a jumbo 50-basis-point Fed hike in December.
A steady start fades in Asia
Global stocks gave up early gains to trade lower on Friday after a turbulent week dominated by revelations involving Nvidia chief executive Jensen Huang that culminated in his resignation, in a blow to the global AI boom he helped advance, Reuters reported. MSCI's broadest index of Asia-Pacific shares outside Japan reversed early gains to trade 0.42% lower. South Korea's Kospi similarly slid 0.85% while Japan's Nikkei added 0.55%.
Shares of Nvidia's customers fell with it: South Korea's Naver fell more than 5%. In China and Hong Kong, AI model stocks Z.AI Co and MiniMax Group fell sharply on worries of reduced access to advanced AI chips, while data centre suppliers Zhongji Innolight and Eoptolink Technology, whose businesses are heavily reliant on US markets, slumped. Nasdaq futures and S&P 500 futures fell 0.3% and 0.1%, respectively. The Wall Street Journal reported that the tentative rebound in Asia's bruised technology stocks faded on Friday afternoon, and that Bitcoin crashed past $70,000 while Ethereum slid below the $2,000 mark.
Yields climb, the dollar follows
US Treasury yields climbed, with the 2-year yield hitting a one-month high, lifting the dollar as investors weighed the prospect of an outsized 50-basis-point rate hike by the Federal Reserve next month. The 2-year US Treasury yield peaked at 4.8920% in the early Asian session, while the benchmark 10-year yield rose to a three-week high of 5.1433%.
Investors now see a 13% chance of a jumbo 50-basis-point Fed hike in December, up from 0 a week ago, according to the CME FedWatch tool. Capital Group's Manusha Samaraweera noted that markets have three Fed hikes priced in over the next 12 months after a hotter-than-expected CPI print. The dollar was on track for a weekly gain of 0.9%, its biggest in more than a month, while the yen languished close to the key 160 per dollar level, leaving traders on alert for any intervention from Tokyo.
- 2-year Treasury yield4.8920%, a one-month high
- 10-year Treasury yield5.1433%, a three-week high
- Chance of a 50bp Fed hike in Dec.13%, up from 0 a week ago
- MSCI Asia-Pacific ex-JapanDown 0.42%
- Dollar weekly gain0.9%, biggest in over a month
Washington turns to Nvidia
US Senate Banking Committee Chairman Tim Scott sent letters on Thursday to Commerce Secretary Howard Lutnick and Huang, asking them to testify over recent developments at Nvidia. Huang's exit could have far-reaching consequences for US chip export policy and the broader AI industry and supply chain, given his push to preserve access to the Chinese market and his close ties with US President Donald Trump.
"Jensen has obviously been a singular force in many ways so the impact will likely be felt far and wide," said UBS analyst Timothy Arcuri. Jon Zauderer, Citi's head of specialist sales, said competitors such as AMD, Arista and Broadcom could benefit from the Nvidia fallout. Elsewhere, oil prices were headed for a second weekly decline: Brent crude futures were up 0.25% at $96.06 a barrel while US crude eased 0.26% to $88.52, though both were set to lose more than 2% for the week. Spot gold gained 0.5% to $3,896.33 an ounce.
