TOKYO, Oct 20 : Asian stocks retreated broadly on Tuesday while oil prices rose as geopolitical risks rattled sentiment ahead of key results from AI bellwether companies.
The euro recouped some losses from the previous session that were spurred by escalating riots in France. Crude prices resumed their climb as markets weighed an executive order from US President Donald Trump that waived some sanctions and tariffs on Russian energy.
The spotlight is on corporate earnings, with investors seeking fresh evidence that consumers and the broader economy remain resilient. Quarterly earnings are due from SpaceX and Netflix on Tuesday, with results from AI heavyweights such as Meta and Tesla scheduled for later in the week.
"The market is happy to cover shorts and unwind defensive trades, but that's very different from having the conviction to rebuild aggressive exposure to AI," Chris Weston, head of research at Pepperstone, said in a note. "French sovereign risk is clearly being priced into European equities, but the euro's resilience suggests traders aren't yet treating it as a systemic European problem."
The MSCI Asia ex-Japan index fell 1.14 per cent, while Japan's Nikkei 225 dropped 0.98 per cent. South Korea’s KOSPI tumbled 3.92 per cent.
In early European trade, the pan-region Euro Stoxx 50 futures slipped 0.57 per cent, German DAX futures dipped 0.33 per cent and FTSE futures lost 0.47 per cent. US stock futures, the S&P 500 e-minis, rose 0.12 per cent to 7,743.5.
The dollar index, which measures the greenback against a basket of currencies, fell 0.16 per cent to 101.80, with the euro up 0.17 per cent at $1.1229. The Japanese yen strengthened 0.16 per cent to 158.24 per dollar, and sterling rose 0.21 per cent to $1.3327.
Overnight, French authorities set curfews in parts of several cities including Paris, Lille and Nice, after a weekend of riots and looting stemming from nationwide anti-government protests. And in the Middle East, dozens were killed and more than 200 were injured after an attack by the Iran-aligned Houthis on a government security forces training camp in Yemen's Shabwa province.
EARNINGS AND AI MAJORS IN FOCUS
Netflix is expected to report slowing revenue growth in the third quarter, while SpaceX is forecast to report $12.74 billion in quarterly revenue. General Motors, Hasbro, Halliburton, and 3M are among the more established names due to report on Tuesday.
Along with quarterly results, markets are increasingly focused on the massive spending plans of the major AI players. Facebook operator Meta is one of five AI hyperscalers expected to increase combined capital expenditure to about $1.2 trillion next year, according to Goldman Sachs.
"Investors are fine with AI being used more. What they're questioning is whether every dollar of AI capex earns more than it costs to finance," said Ninghui Liu, head of investment strategy and research for APAC at State Street Investment Management. "AI has gone from an earnings story to a balance-sheet story, and now a unit-economics story to some extent."
Shares in South Korean AI infrastructure company Elice Group plunged nearly 30 per cent below their initial public offering price in their market debut, after the firm raised 201.1 billion won ($151.12 million) in an IPO.
US crude rose 0.18 per cent to $103.85 a barrel and Brent rose to $109.64 per barrel, up 0.08 per cent on the day. Spot gold rose 0.13 per cent to $4,145.25 an ounce.
An executive order issued by Trump on Friday night waived key Russia-related US sanctions and tariffs, including duties on the country's goods and penalties for buying its oil and gas. However, Trump said on Saturday he has yet to announce a final decision on the matter.
Inflationary pressures from elevated oil prices have put most major central banks on a tightening bias, though with a careful eye on whether economies are resilient enough to absorb higher interest rates. Recent comments from Federal Reserve officials, including Chair Kevin Warsh, suggest policymakers are in no rush to hike rates again.
The US Census Bureau is due to release September figures, with housing starts expected to rise to 1.305 million from 1.275 million in August, while building permits are seen at 1.395 million compared with 1.403 million.
European Central Bank policymaker Martin Kocher is due to speak later on Tuesday, as well as ECB policymaker and Finnish central bank governor Olli Rehn. Bank of England Monetary Policy Committee member Megan Greene will deliver a speech at the London School of Economics.
In cryptocurrencies, bitcoin gained 0.22 per cent to $82,117.01, and ether rose 0.63 per cent to $2,413.64.