AI Brief
- Oil prices plunged nearly 9%, with Brent crude falling below US$100 a barrel, marking the largest weekly drop since April 2020.
- US midterm election victories for Democrats boosted stock markets, pressured the dollar, and raised hopes for an end to the US-Iran war.
- Solar stocks surged on expectations of increased renewable support, while Asian chip and data centre shares declined amid anticipated regulatory changes.
SINGAPORE: Oil, chip stocks and the dollar were under pressure in Asia on Thursday and just about everything else was up after US voters swept the Democrats to a series of stunning midterm election wins, a result that raised hopes for an end to the US-Iran war.
Brent crude futures LCOc1 dived nearly 9% overnight, falling below US$100 a barrel. Brent has dropped by about 20% so far this week. If sustained through to Friday's close, it would make for the largest weekly drop in oil prices since a week in April 2020 when US crude briefly fell into negative territory.
Tumbling energy prices encouraged a rally in bonds, which lowered yields, pulled the dollar to a one-month low of US$1.1273 per euro EUR=, and helped stocks.
Broad stock indexes climbed on the clear outcome, with the S&P 500 closing 1.6% higher and European shares notching a two-month high.
Solar supply chain stocks jumped the most, in anticipation of Democrats boosting support for renewables, while shares in data centre companies and their equipment suppliers across Asia fell on expectations of tougher regulation.
South Korea's chipmaker-heavy KOSPI slid 4% and in morning trade was not far from hitting a seven-month low. Taiwan's benchmark index fell 1.8%. Tech equipment suppliers dragged on the Nikkei, which fell 0.5%.
Democratic data-centre opponents who campaigned, in part, on moratoriums on data centre construction won stunning victories in Texas and Georgia in a sign public opinion is shifting on AI.
To be sure, most analysts think it ultimately won't dent demand for artificial intelligence, data centres or computer chips but do now expect at least a temporary slowdown.
"The magnitude of the victory is what has caught markets off guard," said Chris Weston, head of research at brokerage Pepperstone in Melbourne.
At US$93.50, oil was testing overnight lows in the Asia morning as traders chose to bet that US President Donald Trump, facing a Democratic Congress and hurt by high energy prices caused by the Mideast conflict, would be less likely to escalate the war with Iran.
Trump acknowledged on Wednesday that the war played a role in Republicans' defeat and his vice president, JD Vance, was even more blunt on X: "The reason we lost is the war."
A resolution could push oil prices lower still, alleviating inflation pressure and reducing the likelihood of future interest rate hikes.
The yield on benchmark 10-year US Treasuries US10YT=RR was down 6 basis points (bps) overnight and by a further basis point in early Tokyo trade to 4.87%, while 2-year yields, which track short-term rate expectations, fell about 2 bps to 4.56%.
