Asian Markets React to Oracle’s Earnings and U.S. Rate Cut

Asian shares experienced mixed results on Thursday as concerns over technology stocks resurfaced following disappointing earnings from Oracle Corporation. This came as the U.S. stock market approached record highs after the Federal Reserve announced a cut to its main interest rate, a move that was anticipated by investors.

The Federal Reserve’s decision to lower interest rates was widely expected, but comments from Chair Jerome Powell hinted at the possibility of further cuts in 2026. Despite this, U.S. futures and oil prices experienced declines. The Fed’s interest rate cut, while not a market mover on its own, prompted some investors to feel optimistic about the future, particularly due to Powell’s less definitive stance on halting potential future cuts.

In the wake of Oracle’s earnings report, which fell short of expectations, shares plummeted by 11.5% in after-hours trading. The company’s ongoing investments in artificial intelligence have raised concerns regarding its cash flow and reliance on debt financing. Ipek Ozkardeskaya from Swissquote remarked, “Frankly, the report was not dramatically bad, but it came to confirm concerns around heavy AI spending, financed by debt, with an unknown timeline for revenue generation.”

Market Reactions Across Asia

In Tokyo, the Nikkei 225 index fell 0.9% to 50,148.82, largely driven by a 7.7% decline in shares of SoftBank Group Corp., a significant player in the AI sector. The pressure on local shares is compounded by growing expectations that the Bank of Japan will raise interest rates in its upcoming meeting.

Hong Kong’s Hang Seng Index retraced earlier gains, closing down 0.1% at 25,513.38 after the Hong Kong Monetary Authority followed the Fed’s lead, lowering borrowing costs to 4.00%, their lowest level since October 2022. Meanwhile, the Shanghai Composite Index fell 0.7% to 3,873.32 as investors remained cautious ahead of China’s credit data for November, which showed a significant drop in new yuan loans for October, indicating weaker consumer demand.

In Australia, the S&P/ASX 200 saw a slight increase of nearly 0.2% to 8,592.00, aided by gains in gold and mining stocks. The nation’s unemployment rate for November remained stable at 4.3%, slightly below expectations of 4.4%. Conversely, South Korea’s Kospi index fell 0.6% to 4,110.62, affected by a 3.8% drop in chip maker SK Hynix after warnings were issued regarding its rapid rise this year. Taiwan’s Taiex index closed down 1.3%, while India’s BSE Sensex managed to rise 0.4%.

U.S. Market Overview

On Wall Street, the S&P 500 climbed 0.7% to 6,886.68, nearing its all-time high set in October. The Dow Jones Industrial Average rose by 1% to 48,057.75, and the Nasdaq composite increased 0.3% to 23,654.16. Lower interest rates are generally favorable for economic growth, often driving up investment prices, despite concerns about inflation.

Powell acknowledged the challenges facing the Fed, noting that while the job market is slowing, inflation remains a concern. His comments reflect the delicate balance the central bank must maintain, as addressing one issue may exacerbate the other. In his latest remarks, Powell indicated that interest rates are now positioned to neither significantly boost inflation nor the job market, allowing the Fed time to assess future actions as more data on employment and inflation becomes available.

In other market movements, shares of GE Vernova soared 15.6% after the energy company raised its revenue forecast for 2028, doubled its dividend, and expanded its stock buyback program. Palantir Technologies and Cracker Barrel Old Country Store also saw gains of 3.3% and 3.5%, respectively.

As global markets adjust to these developments, investors remain vigilant, navigating the complexities of interest rates, corporate earnings, and economic forecasts.