AI sentiment turns cautious, South Korean stocks close down 0.5%, US dollar strengthens, Japanese long-term bonds decline.

AI sentiment turns cautious, South Korean stocks close down 0.5%, US dollar strengthens, Japanese long-term bonds decline.

Asia-Pacific technology stocks’ rebound momentum is stalled, as investors’ doubts over the sustainability of the artificial intelligence rally rise again.

On Monday, the Nikkei 225 index closed flat at 69,737.69 points. Japan’s TOPIX index rose 0.9% to 4,101.96 points. Korea's KOSPI closed down 0.5% at 8,051.33 points. Meanwhile, Japan's 10-year government bond yield climbed to 2.815%, the highest since 1996; the 20-year yield rose to 3.785%, also a 1996 record; the 30-year yield increased 3 basis points to 4.055%.

U.S. stock futures narrowed their gains, with S&P 500 futures up about 0.1%, significantly retreating from levels before last Friday’s U.S. holiday market close. European stock futures point to a lower open, after European shares set a historic closing high last Friday. The dollar strengthened; the Bloomberg Dollar Index rose against all G10 currencies.

IG International market analyst Fabien Yip said: “The rotation from highly valued tech stocks to cyclical and defensive sectors continues, with recognition from both U.S. and Asian investors. Sector rotation is a healthy signal of improved market breadth after a narrow rise from April to June.”

The Nikkei 225 closed flat at 69,737.69 points. Japan’s TOPIX rose 0.9% to 4,101.96 points. Korea’s KOSPI fell 0.5% to 8,051.33 points.S&P 500 futures are up about 0.1% to 0.2%, while European stock futures point to a lower open, after European shares hit a historic closing high last Friday.The dollar continues to strengthen, with the yen trading around 161.54.U.S. 10-year Treasury yield fell 2 basis points to 4.46%.Japan’s 10-year government bond yield climbed to 2.815%, highest since 1996; 20-year yield rose to 3.785%, also highest since 1996; 30-year yield increased 3 basis points to 4.055%.Gold prices are basically flat after three consecutive days of gains, now trading near $4,158 per ounce.WTI crude fell 0.4% to $68.44 per barrel.Bitcoin rose 0.7%, at $63,148.

Tech Shares’ Rebound Stalls, Rotation Continues

The recovery of tech and semiconductor sectors in Asia-Pacific markets stalled noticeably on Monday. Korea’s KOSPI dropped 1.4%, with chip giants Samsung Electronics and SK Hynix both falling—SK Hynix’s decline approached 4% at its worst. SK Hynix will launch a $29 billion U.S. listing plan this week, a move seen as helping it expand its capital advantage in the global AI memory chip competition; however, profit-taking pressure before the listing obviously weighed on its stock performance.

Semiconductor industry fundamentals are not entirely bearish. Nvidia server assembler Foxconn reported a quarterly sales increase of 40% year-on-year, surpassing market expectations, and said AI demand keeps expanding. Samsung Electronics reportedly also plans to raise Q3 DRAM average prices by about 20% quarter-on-quarter, having verbally notified some clients.

Market Sentiment Turns Cautious, Awaiting Earnings Season

The market’s pace entering the second half of the year is clearly more cautious. Kazuhiro Sasaki, research director at Phillip Securities Japan, noted recent volatility has intensified—especially in the tech sector—fund managers tend to keep reducing their holdings of AI stocks that have dramatically outperformed, with money gradually shifting to lagging sectors and value stocks. He expects automotive, machinery, and healthcare sectors to benefit from the rotation.

Before major chip makers release earnings reports, investors’ cautious attitude toward tech stocks is expected to continue. Sasaki also pointed out that if earnings exceed expectations, given some stocks have undergone significant corrections and valuations have returned to relatively reasonable levels, the market could trigger a major rebound.

From a more macro perspective, the market focus is currently on two main themes: first, the effect of the energy shock from the Iran war on inflation and growth prospects; second, whether tech companies can prove in this earnings season that their AI capital expenditure has translated into substantive profit growth. Brent crude fell 0.6% Monday to around $71.70 per barrel, somewhat easing inflation concerns and boosting U.S. Treasuries.

FX and Commodity Market: Yen Under Pressure, Gold Stable

In the foreign exchange market, the dollar keeps strengthening. Goldman Sachs has raised its 1-year dollar/yen forecast from 155 to 165 and favors carry trades. The yen traded near 161.54 early in the session. The steady climb in Japanese government bond yields against the yen’s weakness reflects the market’s complex expectations on Japan’s monetary policy path.

Gold prices are basically flat after three consecutive days of gains, currently trading near $4,158 per ounce. The market generally expects the Federal Reserve won’t raise rates in the short term, providing some support for gold.

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