Asger Risom
Asian stocks slipped on Tuesday as early optimism over the end of the U.S. government shutdown faded and renewed caution around overheated technology valuations hit regional markets.
Asian stocks slipped on Tuesday as early optimism over the end of the U.S. government shutdown faded and renewed caution around overheated technology valuations hit regional markets.
Rally runs out of steam
The boost from Wall Street’s overnight surge—where the Nasdaq and S&P 500 notched their biggest daily gains in months—quickly wore off in Asia. Japan’s Nikkei gave up early advances to close down 0.5%, weighed by declines in semiconductor shares, Reuters reports.
South Korea’s won also weakened sharply as investors pulled money out of the tech-heavy Kospi in favour of foreign assets. The index erased morning gains to trade flat, while Hong Kong’s Hang Seng and China’s Shanghai Composite each slipped around 0.5% by mid-afternoon.
“There’s probably a bit of fear about the overheated AI rally—not necessarily any concrete concern,” said Nomura strategist Naka Matsuzawa in Tokyo.
Shutdown deal calms nerves
The U.S. Senate on Monday approved a compromise bill to restore federal funding and end what had become the longest government shutdown in history. The measure now moves to the House of Representatives, where Speaker Mike Johnson said he expects to pass it by Wednesday and send it to President Donald Trump for signature.
Economists estimate the six-week shutdown may have shaved up to one percentage point off fourth-quarter U.S. GDP. But many expect a rebound next quarter. “Typically what happens is activity bounces back,” said Carlos Casanova of UBP in Hong Kong.
On Monday, the S&P 500 closed 1.54% higher, while the Nasdaq recorded its largest daily gain since May. Gold prices held firm above $4,100 an ounce.
Yen weakens, yields stabilize
Safe-haven assets lost ground as risk appetite briefly improved. The Japanese yen weakened to 154.49 per dollar, its lowest level since February. U.S. Treasury markets were closed for Veterans Day, though Monday’s session saw mixed moves as investors balanced expectations for a December rate cut with renewed interest in equities.
“Long-end yields sell off because people start to switch back out of bonds into equities,” said Andrew Lilley, chief rates strategist at Barrenjoey in Sydney. “But the front-end yields rally because you start to price in more of a chance of a cut.”
Ten-year Treasury yields reached 4.15% before easing to 4.11%. Three-month T-bill yields edged slightly higher at 3.88%, while Brent crude oil held steady at $63.96 a barrel.
Sources: Reuters, UBP, Nomura, Barrenjoey
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