Asian markets faced volatility on Monday as investors tried to recover from last week's sharp decline due to disappointing technology earnings and focused their attention on the U.S. midterm elections on Tuesday.
Impact of Falling Oil Prices on Markets
In this context, investors received support from falling oil prices, following a report that Donald Trump, the President of the United States, called for continued negotiations with Iran instead of resuming war after the elections.
Companies related to artificial intelligence technologies faced new selling pressure as Amazon, Alphabet, and Microsoft announced they would continue heavy investments in data centers and chips, while investors are eagerly awaiting returns. According to analytical estimates, these three companies, along with Meta, are expected to spend over $700 billion on investments this year, a significant portion of which is dedicated to AI infrastructure.
Concerns Over Excessive Spending in the Technology Sector
This raised concerns that spending in this sector may have gone too far. A Bloomberg report showed that 90% of software companies in the S&P 500 surpassed earnings expectations this quarter, but only 70% also met revenue forecasts. In the previous quarter, all companies had surpassed profit expectations, and over 80% of revenue forecasts had been achieved.
Apple, AMD, and Palantir are also set to release their reports this week.
The Nasdaq index fell nearly 3% on Friday, and technology stocks in Asia also faced difficulties. Japanese chipmaker Kioxia dropped over 15%, while Samsung fell more than 1%. In contrast, SK Hynix rose over 1%, and Taiwan's TSMC grew nearly 2%.
Meanwhile, markets in Tokyo, Sydney, Singapore, and Taipei declined, while Seoul, Hong Kong, and Shanghai saw increases.
Political and Military Developments in the Region
The drop in oil prices was also more than 2% after Axios reported that Trump called for continued talks with Iran, which disappointed Israeli Prime Minister Benjamin Netanyahu. Axios also reported that J.D. Vance, the Vice President, sent a letter to Mohsen Rezaei, Iran's National Security Chief, regarding the possibility of new talks, marking the highest level of contact in recent months.
Razan Helal from FOREX.com said: "Despite the deadlock following the Israeli elections, the likelihood of a diplomatic breakthrough after increasing mediation efforts by Qatar and regional allies may be improving. Reports indicate negotiations about easing sanctions and reopening the Strait of Hormuz, while nuclear restrictions and inspections remain significant issues."
However, Trump referred again to military action at a campaign rally on Sunday. He said: "The only reason I haven't finished with Iran is that I want to be good. I want to save all lives if I can... but at some point, we have to give them the hammer." He had previously told reporters that "we still need to watch one or two places, but we can do that in 10 minutes."
The Iranian military spokesman, Mohammad Akramini, said over the weekend that any new war could be longer than the previous round and that "the American president is not in a position to determine the time or conditions for its end." Polls indicate that Democrats are likely to gain control of the House of Representatives in Tuesday's midterm elections and have chances for Senate control as well.
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