Asian Markets Decline on Cooling AI Rally and Looming US-Iran Tensions

Asian Markets Decline Amid Cooling Enthusiasm Over AI-Driven Rally

Asian markets took a hit on Friday, 5 June, as the excitement surrounding the AI-driven rally began to lose momentum. The decline was led by South Korean stocks, which experienced a sharp overnight sell-off in US technology stocks. South Korea's Kospi index plummeted 5.7%, with major technology stocks suffering steep losses. Shares of Samsung Electronics and SK Hynix fell around 6% and 8%, respectively, while the small-cap Kosdaq index dropped 2.41%.

The decline was not limited to South Korea. Japan's Nikkei 225 also slipped 1.1% on Friday, while Australia's S&P/ASX 200 edged lower, declining 0.2%. Hong Kong's Hang Seng index futures were trading at 25,158, below the benchmark's previous close of 25,253.40 on Thursday.

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The decline in Asian markets is likely to influence sentiment in emerging markets, including India, where Gift Nifty was trading near the 23,495 mark, about 17 points below the previous close of Nifty futures. The subdued opening for the Indian equity benchmarks can be attributed to the cautious global risk sentiment after the recent AI-led rally lost momentum.

The US equity index futures also traded lower, reflecting the cooling enthusiasm over the AI-driven rally. Nasdaq 100 futures fell more than 1%, signaling a potential third straight session of declines for the technology-focused index. The previous day, investors shifted away from tech shares into a wider range of sectors, helping the Dow Jones Industrial Average climb to a fresh record high.

Commodities also experienced a mixed session, with Brent crude stabilizing near $95 per barrel on Friday after retreating in the prior session. The decline came as markets grew optimistic about a possible diplomatic breakthrough between the US and Iran following a conditional ceasefire between Israel and Lebanon. Treasury yields were largely unchanged, while Bitcoin gained modestly to trade around $63,700.

The sharp recovery in semiconductor stocks from their conflict-driven lows lost momentum after Broadcom Inc.'s forecast for AI chip sales failed to meet lofty market expectations. Attention now turns to Friday's US jobs report, a key event that could influence expectations for Federal Reserve policy and determine whether the AI-led market rally broadens or begins to fade.

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On the geopolitical front, President Donald Trump said ceasefire negotiations had entered their "final" phase, although Iran's foreign minister earlier indicated that talks had stalled. Tensions escalated on Wednesday when Iran launched missiles and drones at Kuwait and Bahrain, resulting in one death and dozens of injuries at Kuwait's main airport, after the US targeted an oil tanker bound for Iran.

In contrast, the US markets overnight saw a surge in the Dow Jones Industrial Average, which climbed 874.86 points, or 1.73%, to finish at an all-time closing high of 51,561.93. The Nasdaq, however, slipped 0.09% to 26,830.96, while the S&P 500 advanced 0.41% to end the session at 7,584.31.