By Gregor Stuart Hunter
SINGAPORE, Feb 24 (Reuters) – Asian stocks stabilised after a wobbly start on Tuesday as a fresh AI-linked selloff on Wall Street rattled investors, with sentiment also hurt by heightened anxiety over U.S. President Donald Trump’s tariff policy and geopolitical tensions.
MSCI’s broadest index of Asia-Pacific shares outside Japan was on track for a seven-day rally, advancing 0.4% as benchmarks in Taiwan and South Korea both hit their highest level on record.
Tokyo’s Nikkei 225 rose 0.8% and China’s CSI 300 gained 1.3% as markets there played catch-up after a holiday. S&P 500 e-mini futures were up 0.3%.
Overnight, the S&P 500 was down 1.0%, erasing the past week of gains, as fears over the displacement effects of AI on software and other industries pushed the Nasdaq Composite 1.1% lower. A bearish analysis from Citrini Research on the possible risks to the global economy took a further toll on jittery investor sentiment.
The report was “getting a lot of airplay”, said Tony Sycamore, market analyst at IG in Sydney. “It does align with quite a few fears which are out there,” he added.
“The Asia equity markets don’t have the exposure as such to the mega-tech stocks, but they’re still quite exposed to the AI revolution – they’re doing well because there’s still that exposure to AI, without the valuation concerns.”
Shares of companies that were at the centre of the recent rally risked getting caught out on stretched valuations, said Rupal Agarwal, Asia quant strategist at Bernstein in Singapore.
“Stocks that have done the best over the last 12 months in Asia and the U.S. have seen too many investors chasing these names, to an extent not seen outside of the 2000 or 2020 cycle,” she said.
“With valuations at a record high and earnings revisions showing signs of peaking, the risk of reversal in these stocks is high.”
On Monday, Trump warned countries against backing away from recently negotiated trade deals with the U.S. after the Supreme Court struck down his emergency tariffs, saying that he would hit them with much higher duties under different trade laws.
The new tariffs are based on Section 122 of the Trade Act of 1974, causing further confusion in markets trying to come to grips with U.S. protectionist policies.
Japanese trade minister Ryosei Akazawa has requested that the nation’s treatment under a new U.S. tariff regime be as favourable as an agreement reached between the two sides last year.
In Taiwan, the government said it would seek assurances from the U.S. to ensure the beneficial terms it has already agreed do not change.
The CBOE Volatility Index, sometimes known as Wall Street’s “fear gauge”, rose 1.9 percentage points to 21.01.
The return of Japan and China from holidays on Tuesday added to liquidity in regional markets.
Against the yen, the U.S. dollar was 0.2% stronger at 154.985 yen, after the Nikkei newspaper reported that U.S. authorities took the initiative in conducting the January “rate checks” to prop up the Japanese currency and were ready to conduct joint intervention at Tokyo’s request.
The Chinese yuan was up 0.1% at 6.8938 yuan against the dollar in offshore trade, even as Beijing set the daily fixing for its currency at the strongest in almost three years and kept its benchmark lending rate on hold for a ninth consecutive month.
On the U.S. monetary front, Fed funds futures are pricing an implied 95.5% probability of rates remaining on hold at the next two-day meeting on March 18, little changed from a day earlier, according to the CME Group’s FedWatch tool.
The yield on the U.S. 10-year Treasury bond was last up 1.9 basis points at 4.0443% as investors pondered the implications of the Supreme Court’s decision on U.S. tax receipts.
In commodities markets, Brent crude was up 0.8% at $72.06 as tensions continued to simmer between the U.S. and Iran. On Monday, a senior State Department official said the department is pulling out non-essential government personnel and their eligible family members from the U.S. embassy in Lebanon, amid growing concerns about the risk of a military conflict.
Despite the uncertainty, precious metals and cryptocurrencies saw little respite from volatility, with safe-haven gold off 0.9% at $5,182.23, while silver tumbled 1.1% to $87.28.
Bitcoin was last down 1.3% at $63,736.65, while ether slipped 1.6% to $1,834.30.
(Reporting by Gregor Stuart Hunter Editing by Shri Navaratnam)
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