The Japan Times - Stock markets track Wall St down with Nvidia, US jobs in view

Building anxiety that this year's record rally linked to all things artificial intelligence has made some traders question whether the billions spent on the industry might not see the big returns as soon as hoped.

Compounding the negativity are concerns that the Federal Reserve will decide against a third straight interest rate cut next month, as stubborn inflation plays up against a weakening jobs market.

The rally this year has been driven by fears of missing out on the AI bandwagon and bets on US borrowing costs coming down.

That has put two major events this week well in the spotlight.

Wednesday sees Nvidia -- at the forefront of the AI push with its top-end chips -- release its latest earnings report, which will be pored over for an idea about the outlook for the sector.

Reports from retailers Home Depot, Target and Walmart will also give an insight into consumer sentiment.

Investors have become sensitive to any negative news surrounding the AI universe and were given a jolt this week when it emerged that tech billionaire Peter Thiel's hedge fund had offloaded all its Nvidia stake, which Bloomberg valued at about $100 million.

"Analysts are sounding upbeat ahead of the report," Neil Wilson at Saxo Markets said in a note. "But the bar is set very high and we know that if investors are starting to wobble the whole house of cards can come crashing down at any point.

"Profitability at the stocks at the heart of the AI bubble remains very strong, but any weakness evident in the (third quarter) from Nvidia would be punished hard by markets."

Thursday is expected to see the release of the US September jobs report after delays due to the government shutdown. The data will provide a fresh snapshot of the world's number one economy and give an idea about the chances of another rate cut.

The chances of a December reduction are around 50-50, with Fed officials recently flagging concerns about inflation more than the jobs market.

Bank boss Jerome Powell said last month that another cut at its December policy meeting was not a "foregone conclusion", a comment that has been echoed by a number of colleagues.

- Keeping powder dry? -

Still, Fed governor Christopher Waller said on Monday that "my focus is on the labour market, and after months of weakening, it is unlikely that the September jobs report later this week or any other data that's going to come out in the next few weeks is going to change my view that another cut is in order".

Reserve vice chair Philip Jefferson said that, while he saw further downside risks to jobs, he wanted decision makers to proceed carefully, suggesting he is keeping his powder dry.

After a day deep in the red on Wall Street, Asia also struggled with Tokyo and Seoul -- which have enjoyed hitting numerous records this year -- at the forefront of the selling.

Tokyo tumbled more than three percent, with investors nervously looking at Japanese bond markets as Prime Minister Sanae Takaichi prepares to unveil an economic stimulus package.

Yields on the 20-year government bond hit their highest since 1999 amid speculation the spending bill will ramp up borrowing. The yields on other long-dated notes also jumped.

Takaichi is due to meet BoJ head Kazuo Ueda to discuss bank policy, with its plans to raise rates likely to be on the agenda.

The yen slipped to around 155.38 per dollar, its weakest since January, amid fading expectations for more Bank of Japan interest rate hikes. The unit's retreat has also raised the possibility of officials intervening to provide support.

The selling comes amid a deepening spat between Japan and China over Takaichi's comments on Taiwan, which have seen the two warn their citizens about visiting the other's country.

Seoul also tanked more than three percent, having enjoyed a spectacular rally of more than 60 percent so far this year led by chip titans Samsung and SK hynix, which were both hammered on Tuesday.

Taipei was another casualty, shedding more than two percent as market heavyweight chip firm TSMC suffered selling pressure.

Hong Kong and Sydney each lost close to two percent, while Shanghai, Singapore, Wellington, Mumbai, Manila and Bangkok were well down.

London, Paris and Frankfurt all fell more than one percent.

Bitcoin continued to struggle with the risk-averse atmosphere, and fell below $90,000 for the first time in seven months.

The unit has been on a rollercoaster this year, having struggled in the first half to hit as low as $74,424 in April before soaring to a record high of $126,251 last month.

- Key figures at around 0815 GMT -

Tokyo - Nikkei 225: DOWN 3.2 percent at 48,702.98 (close)

Hong Kong - Hang Seng Index: DOWN 1.7 percent at 25,930.03 (close)

Shanghai - Composite: DOWN 0.8 percent at 3,939.81 (close)

London - FTSE 100: DOWN 1.0 percent at 9,575.69

Dollar/yen: DOWN at 155.10 yen from 155.23 yen on Monday

Euro/dollar: UP at $1.1597 from $1.1589

Pound/dollar: DOWN at $1.3157 from $1.3156

Euro/pound: UP at 88.14 pence from 88.09 pence

West Texas Intermediate: DOWN 0.8 percent at $59.45 per barrel

Brent North Sea Crude: DOWN 0.7 percent at $63.75 per barrel

New York - Dow: DOWN 1.2 percent at 46,590.24 (close)

K.Abe--JT