SINGAPORE: A global stock rout on Wall Street spilled into Asia on Friday, leaving investors dazed and many regional benchmarks in the red as wrenching volatility gripped precious metals and cryptocurrencies.
The MSCI All-Country World Index rallied off intra-session lows to trade flat, but the benchmark was still on track for its worst week since mid-November.
MSCI's broadest index of Asia-Pacific shares outside Japan tumbled 0.7% to head for a second straight day of losses. S&P 500 e-mini futures slid 0.3% and Nasdaq e-mini futures fell 0.5%.
"There's a massive rotation that's going on, and Nasdaq is clearly underperforming the S&P and things like boring consumer staple stocks," said Prashant Bhayani, chief investment officer for Asia at BNP Paribas Wealth Management. "The market is starting to say 'ok, yeah, AI is very interesting', but people are also saying 'What is my payback?'"
Stocks on Wall Street sold off on Thursday for a third straight day on fears that new AI models may start to eat into the profits of software firms, with the S&P 500 turning negative for the year as fears around the labour market grew.
Layoffs announced by U.S. employers surged in January to the highest level for the month in 17 years, a survey from global outplacement firm Challenger, Gray & Christmas showed on Thursday.
TESTING TIME FOR SPECULATIVE TRADERS
Cryptocurrencies managed to staunch a bruising selloff for now after a wipeout on Thursday, part of a larger decline that has knocked $2 trillion in value from the market since October. Bitcoin rallied 2.6% to $64,735.60 after earlier falling as much as 4.9% to a low of $60,008.52 while ether was last up 3.1% at $1,904.01, partially recouping a 5.1% decline.
Precious metals were also looking to regain their footing after sharp falls, with silver clawing back 1.9% to $72.54 after having plunged as much as 10%. Gold was last up 1.6% at $4,843.83 after an earlier decline of 2.4%.
China's UBS SDIC Silver Futures fund, which has recently emerged as an important marker of the rout in precious metals, was suspended for an hour at the start of trading to protect investors after falling by its maximum 10% for several days. The fund promptly fell by the same magnitude when it reopened on Friday.
"You've seen a lot of these big crowded positions being unwound very, very aggressively and that's led to massive flows," said Chris Weston, head of research at Pepperstone Group in Melbourne.
"We're getting to a stage where we could see, later this year, casualties," he added.
"Certain businesses - not the Mag7 - but for some of the smaller businesses, the capital markets may not be so kind," he said, referring to the so-called Magnificent Seven mega-cap technology stocks.
The S&P 500 software and services index dropped 4.6%, having shed about $1 trillion in market value since January 28, in a selloff dubbed "software-mageddon."
Amazon shares tumbled 11.5% in after-hours trading on Thursday after it projected a surge of more than 50% in capital expenditures this year.
Asian stocks were volatile, with some investors seemingly looking for cheaper entry points amid the broad losses. An initial 5% dive for South Korea's KOSPI, which triggered a brief trading halt, was pared to 1.4% later in the trading session.
Japanese stocks rose, with the Nikkei 225 up 0.8% ahead of Sunday's election.
Indonesian stocks traded 2.6% lower after Moody's lowered its outlook on the country's credit rating, citing reduced predictability in policymaking days after MSCI flagged transparency issues that triggered a market rout of more than $80 billion.
BETS MOUNT ON FED RESPONSE
On the U.S. monetary policy front, the market is starting to bet on an increased likelihood of a rate cut by the Federal Reserve at its next meeting, though most still expect it to remain on hold.
Fed funds futures are pricing a 20.7% probability of a 25-basis-point cut at the two-day meeting that ends on March 18, compared with a 9.4% chance a day earlier, according to the CME Group's FedWatch tool.
The U.S. dollar index, which measures the greenback's strength against a basket of six currencies, was last down 0.2% at 97.794. The yield on the U.S. 10-year Treasury bond was last down 2.2 basis points at 4.186%.
In energy markets, Brent crude climbed 1.1% at $68.28. - Reuters
