Market Reactions Following Oracle’s Earnings Release
HONG KONG (Reuters) – Markets took a hit on Thursday, prompted by Oracle’s disappointing performance report. While stocks dipped, bonds remained relatively stable, and the dollar managed to recover some losses after a recent Federal Reserve interest rate cut.
Oracle’s shares (ORCL.N) plummeted more than 11% in after-hours trading. Additionally, S&P 500 futures dropped by 0.9%, and Nasdaq 100 futures fell by 1.3% during Asian trading hours.
In Tokyo, stocks linked to AI were hit the hardest following Oracle’s lower-than-expected earnings and projections. Management’s caution around increasing expenditures suggested that the anticipated returns from infrastructure investments weren’t materializing as swiftly as hoped.
SoftBank Group (9984.T), which is involved with Oracle’s US Stargate data center initiative, saw its stock decline 7.5%. Meanwhile, the MSCI Asia-Pacific index, which excludes Japan, registered a slight increase of 0.06% but also faced its share of setbacks.
Koon Goh, head of Asia research at ANZ, mentioned, “The initial positive sentiment from the Fed’s interest rate cuts… has been overshadowed by the Oracle situation. The spotlight is back on capital spending,” indicating renewed concerns regarding AI investment yields.
The Federal Reserve lowered its benchmark interest rate by 25 basis points, adjusting it to a range of 3.5% to 3.75% as anticipated. Despite this, Fed Chairman Jerome Powell’s remarks during a news conference provided a more tempered outlook, easing some investor fears. Following the rate cut, Wall Street briefly rebounded, with the S&P 500 gaining around 0.7%.
“I don’t think a rate hike is likely at this point,” Powell noted.
This perspective prompted futures markets to speculate on a few rate cuts next year, which weakened the dollar, allowing the euro to climb above $1.17, crossing a notable chart resistance level.
Bond prices increased further as the Fed disclosed plans to initiate the purchase of short-term government bonds, starting as early as Friday. Consequently, the yields on the 10-year and 2-year U.S. Treasury notes dropped slightly, marking a response to the Fed’s actions.
In recent weeks, money markets have displayed volatility, with tight liquidity driving up costs associated with short-term interest rates. Jack Chambers, a senior rates strategist at ANZ, commented on the Fed’s hesitance to sustain such a policy, as it disrupts the effective transmission of monetary policy.
Dollar Dynamics
In the forex arena, risk-sensitive currencies like the Australian and New Zealand dollars were lower during Asian trading, while the yen held steady amid expectations of a rate hike from the Bank of Japan next week.
On Thursday, the yen rebounded, trading at 155.62 yen to the dollar. The euro reached a two-month peak at $1.1707, following comments from European Central Bank President Christine Lagarde regarding potential upward revisions to growth forecasts in Europe.
ING analysts suggested that upcoming non-farm payroll reports in November could provide critical insights, possibly influencing market expectations around additional rate cuts in 2026. They also pointed out that, typically, the dollar tends to weaken toward year-end, indicating a possible rise in EUR/USD to 1.1800.
Separately, oil prices dipped after Thursday’s uptick due to the U.S. seizing a sanctioned oil tanker near Venezuela, stirring concerns around supply disruptions. Brent and U.S. crude oil futures slightly decreased to $62.15 and $58.44 per barrel, respectively.
