Asian stocks cautiously higher as tech sector rattled by Oracle

SINGAPORE: Asian stocks advanced in early trade on Friday following strength on Wall Street overnight, though a fresh decline in Oracle’s share price sent jitters through the tech sector.

Financial markets had to move fast to find their footing this week when the Federal Reserve cut interest rates but gave a less hawkish outlook than expected, and the return of AI bubble worries added to the stress for investors.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.7%, tracking mostly higher U.S. markets on Thursday - the Dow and Russell 2000 indices hit new highs but the Nasdaq fell.

Tokyo’s Nikkei 225 outperformed the region in morning trade, climbing 1% as shares in Softbank Group surged 6% after Bloomberg News reported it is considering acquiring the U.S. data centre company Switch Inc.

S&P 500 e-mini futures were unchanged and Nasdaq future were down 0.2% as markets were on edge after Oracle shares plunged 13%, sparking a tech selloff, as the company’s massive spending and weak forecasts fanned doubts over how quickly the big bets on AI will pay off.

“Oracle announced disappointing earnings alongside further investment in data centres, triggering fresh concerns about AI-related spending, with investors questioning whether the high level of investment will ultimately deliver the required returns,” analysts from Westpac wrote in a research note.

Tech stocks received some support after Broadcom projected first-quarter revenue above Wall Street estimates on Thursday. But gains were tempered after the company said margins would fall due to a higher mix of AI revenue, dragging its shares down 5% in extended trading.

The U.S. dollar index , which measures the greenback’s strength against a basket of six currencies, was last at a two-month low of 98.30, after the Fed’s less hawkish than expected outlook on rates.

Overnight, the dollar was further undermined after jobless claims data showed the number of Americans filing new applications for unemployment benefits increased by the most in nearly 4-1/2 years last week. The data are often volatile around this time of year, and the four-week average of claims suggested labor market conditions remained stable.

Fed funds futures are pricing an implied 75.6% probability that the U.S. central bank will hold interest rates at its next meeting on 28 January, compared to a 73.9% chance a day earlier, according to the CME Group’s FedWatch tool.

Markets are pricing in at least two rate cuts for next year after Fed Chair Jerome Powell said at a post-policy press conference that he did not “think a rate hike is anyone’s base case.”

The yield on the U.S. 10-year Treasury bond was last at 4.151%, up 1.2 basis points compared with late U.S. levels.

Brent crude rose 0.5% to $61.59 as investors focussed their attention on Russia-Ukraine peace talks, after having risen earlier on news the U.S. had seized an oil tanker off the coast of Venezuela.

On Thursday the U.S. issued new sanctions targeting Venezuela, imposing curbs on three nephews of President Nicolas Maduro’s wife, as well as six crude oil tankers and shipping companies linked to them.

Precious metals markets pulled back from fresh highs. Gold was flat at $4,281.91, while silver retreated from record highs, down 0.6% at $63.17.

Crypto markets remained under pressure, with bitcoin off 0.4% at $92,571.96 and ether = down 0.6% at $3,231.69.