Asian Stocks Struggle Amid Hawkish Fed Stance and AI Volatility

Asian stock markets remained subdued on Thursday as investors reacted to the U.S. Federal Reserve’s hawkish stance on interest rates, while technology stocks faced uncertainty following mixed signals on artificial intelligence (AI).

Australian Stocks Outperform as Rate Cut Bets Rise

Australian shares outshone their regional peers, hitting record highs as expectations grew that the Reserve Bank of Australia may cut interest rates as early as February.

Market Caution Over Trump’s Trade Tariff Plans

Investor sentiment remained cautious amid concerns over potential trade tariffs from U.S. President Donald Trump, which could take effect as soon as Saturday.

Lunar New Year Holidays Dampen Trading Activity

Trading volumes across Asia were muted due to market holidays in China, Hong Kong, Singapore, Taiwan, and South Korea for the Lunar New Year. Chinese markets are set to remain closed for the rest of the week.

Wall Street’s Weak Lead Pressures Asian Markets

Asian stocks tracked overnight losses on Wall Street, where major indices closed lower after the Fed held interest rates steady but maintained a hawkish outlook on future cuts, citing persistent inflation concerns.

Tech Stocks Under Pressure Amid AI Concerns

Investor confidence in the tech sector wavered following mixed earnings reports from Microsoft and Tesla. Microsoft’s weaker-than-expected performance in its Azure cloud division—central to its AI growth strategy—raised fresh concerns. However, the company reiterated its commitment to investing billions in AI development.

Meanwhile, Japan’s Nikkei 225 and TOPIX indexes saw little movement, with declines in tech stocks being balanced by gains in domestically focused sectors.

SoftBank Slides on OpenAI Investment Reports

SoftBank Group shares fell over 1%, extending a three-day losing streak of more than 12% following reports that the company is considering a massive $25 billion investment in OpenAI. The news, first reported by the Financial Times, has sparked fresh debate over the sustainability of large-scale AI investments.

China’s DeepSeek AI Model Adds to Market Jitters

Investor concerns over AI deepened after China’s DeepSeek R1 model claimed to rival leading AI systems while using significantly fewer resources. The emergence of cost-effective AI solutions has intensified worries about overvaluation in the global tech sector, contributing to recent losses.

Despite early losses, Wall Street futures edged higher in Asian trade after Trump pledged to combat inflation through policy reforms and banking deregulation.

(Sources: investing.com, reuters.com, ChatGPT)