Asian stock markets gave back some of their recent gains on Friday as investors reacted to renewed worries about technology sector margins and sought refuge in government bonds while awaiting U.S. inflation data. The earlier session in the United States set the tone, with a tech-led rout rippling through markets.
On Wall Street overnight, the technology-focused Nasdaq Composite fell 2% after Cisco Systems reported quarterly adjusted gross margin that missed estimates amid rising memory chip costs. Cisco's shares plunged 12%, erasing roughly $40 billion of market value. The fallout spread to other large technology names, with Apple tumbling 5% - its largest single-day decline since April of last year when sweeping tariffs announced by U.S. President Donald Trump unsettled markets.
Transportation stocks were among the sectors affected as some investors reassessed the pace and nature of artificial intelligence-driven 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. "It is clear that investors are viewing developments in AI and AGI through a new lens, attempting to price a future that feels more uncertain and structurally disruptive than before."
Regional equity gauges cooled from recent highs. MSCI's broadest index of Asia-Pacific shares outside Japan slid 0.6%, reducing this week's advance to 4.1%. Japan's Nikkei index fell 0.9% on the day but remained 5.3% higher for the week. Mainland Chinese blue chips declined 0.6%, while Hong Kong's Hang Seng index retreated 1.5%.
Futures markets reflected a cautious mood in the U.S. and Europe. Nasdaq futures and S&P 500 futures were each up 0.1%, while EURO STOXX 50 futures rose 0.2%.
Precious metals and commodities
After steep losses the previous day, precious metals attempted a rebound. Gold gained about 1% to $4,972 an ounce following a drop of over 3% on Thursday. Silver recovered roughly 2% to $76.8 an ounce after plunging about 10% overnight. Oil prices were largely unchanged on the session after a sharp 3% fall the night before amid weaker demand, easing Middle East conflict concerns and expectations of increased supply. U.S. West Texas Intermediate crude added 0.2% to $62.95 per barrel, while Brent crude futures edged up 0.2% to $67.65 per barrel.
Flight to safety - Treasuries and yields
The wider equity selloff steered investors into U.S. Treasuries, producing a notable drop in yields. The yield on the benchmark 10-year note fell 7 basis points overnight - its largest one-day fall since October 10 - and was steady in early Friday trade at 4.1154%. A strong auction for 30-year U.S. bonds helped send longer-term yields lower, with 30-year yields sliding 8.5 basis points overnight to 4.728%, their lowest level since December 3.
Fed funds futures rallied, reversing most of the losses that followed recent payrolls data, which had reduced the market's chances of a June rate cut. Markets have priced a renewed chance of a policy move in June at around 70%, and overall investors expect a cumulative easing of about 60 basis points this year.
Much attention is fixed on the U.S. inflation report due later in the day. Market forecasts are centered on a monthly rise of 0.3% in the core inflation measure, a pace sufficient to trim the annual rate to 2.5% from 2.7% previously. "Even an in-line result would reflect a meaningful deceleration from December and that could bolster animal spirits and spark energy back into the cyclical trade," said Jose Torres, a senior economist at Interactive Brokers.
Currencies
Risk-sensitive currencies were on the back foot. The Australian dollar was steady at $0.7089 after losing 0.5% overnight, while the New Zealand dollar traded at $0.6033 following a 0.3% overnight slip.
Outlook
Investors entered the U.S. inflation print cautious, balancing the potential for a cooling inflation signal against recent evidence of margin pressures among technology firms. Market participants are monitoring how earnings and cost trends in the tech sector - particularly around chip and memory costs - might influence equity valuations and risk appetite in coming sessions. With bond yields pulled lower by heavy buying and safe-haven demand, the coming inflation data could be pivotal for the relative appeal of cyclical versus defensive assets.