South Korea’s Kospi drags Asian stocks lower after Wall Street rally, oil gains

ASIAN shares edged lower on Wednesday (Oct 7), diverging from a record-setting rally on Wall Street as South Korean equities lagged and crude oil rose.

MSCI’s Asia Pacific equities gauge slipped 0.1 per cent, while the Kospi Index in South Korea dropped about 1 per cent. The Topix Index in Japan climbed 0.3 per cent.

Among the main moves across markets, S&P 500 futures rose 0.1 per cent as at 9.11 am Tokyo time. Hang Seng futures were little changed, Japan’s Topix rose 0.4 per cent and Australia’s S&P/ASX 200 fell 0.2 per cent.

The Asian moves came after the S&P 500 Index and the Nasdaq 100 Index both closed at all-time highs.

The milestones came ahead of the start of the US earnings season next week and were driven by gains in artificial intelligence-related shares, with Nvidia’s market value approaching US$6 trillion.

Tech remained in focus as the Financial Times reported SpaceX was looking to raise US$40 billion to buy Nvidia chips.

Brent crude rose 0.8 per cent to over US$101 a barrel in early Asian trading as traders weighed increased flows through the Strait of Hormuz against a pickup in Iranian attacks against vessels.

Global stocks are hovering near record highs as investors bet companies can withstand higher interest rates and energy costs.

With the economic data calendar light, attention will turn to the upcoming earnings season for signs that hundreds of billions of dollars in AI-related spending by tech giants are translating into stronger profits.

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“Recent economic growth data have been strong and S&P 500 earnings revision breadth has remained positive,” Goldman Sachs strategists led by Ben Snider wrote in a recent note.

“We expect most companies will once again surpass consensus earnings estimates this quarter.”

Analysts expect a roughly 25 per cent increase in third quarter S&P 500 profits from a year earlier, according to data compiled by Bloomberg Intelligence.

Elsewhere, FTSE Russell reaffirmed Indonesia’s emerging market status, providing some relief for the country’s equities.

Also, the deeply distressed tail of the leveraged loan universe has grown to levels not seen since the beginning of the pandemic, with technology the single biggest sector under pressure.

While US stocks soared to records, elevated oil prices, bond yields at multi-year highs and swings in currency markets are still capturing macro traders’ attention.

“Underlying issues that have been in the driver’s seat remain unresolved,” wrote Peter Dragicevich, currency strategist for Apac at Corpay.

“The backdrop points to more bursts of volatility down the track. Recent history shows the more upbeat tone in markets observed overnight may not last too long.” BLOOMBERG