Stocks sink as traders brace for tech earnings, central bank decisions

Asian stocks slipped Monday as the dour mood that sullied last week's trading continued, with investors gearing up for a crucial run of central bank decisions and tech earnings.

A drop in oil prices provided limited support after both main contracts soared Friday to a six-month high, though sentiment remains fragile owing to fears of a resumption of US attacks on Iran after next week's midterm elections. AI-linked firms continued to struggle amid worries about the sustainability of the colossal investment boom that pushed stock markets to multiple record highs in the first half of the year.

Traders are growing increasingly worried about when the vast sums pumped into the sector will see returns, if any, while rising interest rates and bond yields are now calling companies' finances into question.

This week sees the release of earnings from US titans and Magnificent Seven members Amazon, Microsoft and Alphabet as well as South Korean chipmakers SK hynix and Samsung.

A person walks past an electronic stock board displaying Japan’s Nikkei index at a securities firm in Tokyo, Monday, Oct. 26, 2026. AP.

Results from Tesla and Meta last week further stoked spending worries and helped drag stocks lower.

"The AI complex remains under a microscope ahead of what may be the most important stretch of earnings season so far," said SPI Asset Management's Stephen Innes. "Microsoft, Alphabet and Amazon are about to walk on stage, and this is not one of those quarters where a company can simply beat the number, raise the guidance by a whisker and expect applause. Investors want proof now. "They want to know whether the billions going into the compute buildout are building a durable earnings machine or just a shinier version of the same old capex furnace.

"All three main indexes ended in the red on Wall Street on Friday, and Asia followed suit at the start of this week. Seoul, seen by many as a barometer of the AI trade, sank more than one percent, while there were also losses in Tokyo, Shanghai, Hong Kong, Sydney, Singapore and Manila. Still, oil prices dropped more than one percent following Friday's surge of more than three percent fuelled by concerns over supplies caused by the Middle East and Ukraine crises, with the northern hemisphere heading into the winter.

Speculation has been brewing that Donald Trump will ramp up his war on Iran after next Tuesday's elections, with some officials warning the months leading up to the new Congress could be particularly dangerous. The US president did little to allay those fears, telling Fox News on Sunday: "I have a decision to make: Do I finish it off, which would be very easy to do, or do I make a deal? That's all. "Additional forces, including a third aircraft carrier group, have been sent to the region, while US staffing levels have also been reduced.

Also in view this week are policy decisions by the Federal Reserve, European Central Bank and Bank of Japan. While the Fed is expected to hold borrowing costs, traders will be keen to get an insight into its thinking following last month's hike and as inflation remains well above its two percent target.

Agence France-Presse