Asian shares retreated from record highs on Friday as investor concern over shrinking profit margins in the technology sector sent tremors through global markets. The selloff was triggered by disappointing results from Cisco Systems, which reported quarterly gross margins below estimates due to rising memory chip costs, causing its stock to tumble 12% and erasing roughly $40 billion in market value. The fallout spilled into other major tech names, including Apple, which fell 5% in its largest single-day drop since April of last year, while transportation companies also felt pressure amid fears of AI disruption.
“The prevailing tone in markets is a rotation toward more defensive areas of the equity market and companies with steady, less cyclical and more predictable earnings,” said Chris Weston, head of research at Pepperstone. He added that investors are increasingly pricing in structural uncertainty from developments in AI and AGI, contributing to market volatility.
In Asia, the MSCI Asia-Pacific index outside Japan fell 0.6%, trimming the week’s gains to 4.1%. Japan’s Nikkei slid 0.9% but remained up 5.3% for the week, while China’s blue-chip CSI 300 lost 0.6%, and Hong Kong’s Hang Seng Index dropped 1.5%. Futures for the Nasdaq and S&P 500 were slightly higher by 0.1%, and EURO STOXX 50 futures gained 0.2%, suggesting cautious optimism in overnight U.S. trading.
The flight from equities pushed investors toward U.S. Treasuries, with the benchmark 10-year note yield falling 7 basis points overnight to 4.1154%, marking its largest drop since October. Long-term yields also fell, with 30-year notes sliding 8.5 basis points to 4.728%, the lowest level since early December. Strong Treasury auctions and renewed expectations of potential Federal Reserve easing in June drove the rally, with markets now pricing in a 70% chance of a rate cut.
Precious metals rebounded from heavy losses, with gold climbing 1% to $4,972 an ounce and silver rising 2% to $76.8 an ounce, following sharp declines the previous day. In currency markets, risk-sensitive currencies like the Australian and New Zealand dollars slipped, reflecting investor caution ahead of the U.S. inflation report, which is expected to show a 0.3% monthly rise in the core measure, slowing the annual rate to 2.5%. Economists noted that even an in-line result could reignite confidence in cyclical stocks and broader market sentiment.
Oil prices remained mostly flat after a steep overnight drop, with West Texas Intermediate crude edging up 0.2% to $62.95 per barrel and Brent crude rising 0.2% to $67.65 per barrel, as easing concerns over Middle East tensions and forecasts for increased supply tempered price volatility. Investors now await U.S. inflation data as the potential catalyst for the next major market move.
