Trader’s Edge wrote a post · Feb 8 22:37

Markets Not Out Of The Woods Yet Despite Friday Relief Bounce

What Happened Recently (2 Feb - 6 Feb)

Global equity markets navigated a week of stark contrasts, as a tentative recovery on Wall Street contended with a tech-led retreat in Asia and a decisive political shift in Japan. While U.S. indices looked to snap losing streaks, investors across the Pacific grappled with heightened volatility and shifting regulatory landscapes.

1. United States: $E-mini S&P 500 Futures (MAR6) (ESmain.US)$

U.S. equities surged during last Friday’s trading session, after a generally weak week. The $E-mini S&P 500 Futures (MAR6) (ESmain.US)$ closed 0.19% lower with $E-mini NASDAQ 100 Futures (MAR6) (NQmain.US)$ down by 1.97%. Friday's relief bounce broke a three-day slump as technology stocks staged a technical rebound from oversold levels.

The AI Spending Scare: The rally occurred despite significant weakness in mega-cap names. $Amazon (AMZN.US)$ tumbled nearly 8% after projecting a 50% spike in capital expenditures for the year, fueling fears that massive AI investments may not yield immediate profits.

Sector Divergence: While the $The Technology Select Sector SPDR® Fund (XLK.US)$ jumped 3.5%—its best daily performance since May 2023—the gains were concentrated in semiconductors. Software names saw a more muted recovery after a week of selling triggered by a new automation tool from Anthropic, which raised concerns about the obsolescence of existing business models.

Macro Headwinds: Sentiment was further dampened by a cooling labor market, weaker-than-expected guidance from $Advanced Micro Devices (AMD.US)$ , and news of upcoming nuclear talks between the U.S. and Iran.

2. Japan: $TOPIX Futures (JUN6) (TOPIXmain.JP)$

Japanese financial markets entered a new era of political certainty following Prime Minister Sanae Takaichi’s landslide victory on Sunday. $TOPIX Futures (JUN6) (TOPIXmain.JP)$ added a strong 1.46% last week

Reflationary Mandate: Takaichi now holds a firm electoral mandate to reflate the economy. Investors are closely watching whether this momentum leads to aggressive new stimulus or a more measured fiscal approach.

Strategic Winners: Sectors explicitly targeted for investment by the Takaichi administration—including defense, artificial intelligence, and semiconductors—remained key areas of strength.

Hawkish Central Bank: Market analysts characterized the Bank of Japan’s (BOJ) tone as hawkish after it raised four of its six inflation projections, signaling that further rate hikes are likely if these forecasts are realized.

3. China: $HSI Futures (MAR6) (HSImain.HK)$

Chinese and Hong Kong markets faced a grueling week, as global tech weakness and domestic regulatory efforts to curb speculation weighed on risk appetite.

Mainland Pressure: $SSE Composite Index (000001.SH)$ and $CSI 300 Index (000300.SH)$ dropped 1.27% and 1.33% respectively for the week. Regulatory bodies in Shanghai and Shenzhen stepped up monitoring of "abnormal" trading practices to slow the pace of recent gains.

HSI’s Worst Week: In Hong Kong, the $HSI Futures (MAR6) (HSImain.HK)$ fell 1.21% on Friday, logging its worst weekly performance since November 2025, ending last week down by 3.37%.

Global Tech Contagion: Local tech shares followed their U.S. software peers lower, as investors worried that rapidly advancing AI tools could disrupt traditional data service business models.

4. Singapore: $FTSE Singapore Straits Time Index (.STI.SG)$

The Straits Times Index (STI) climbed a marginal 0.6% last week despite broader markets volatility.

Record Territory: Despite the Friday pullback, the index spent much of the week reaching new highs, edging closer to the psychological 5,000 mark.

Mixed Fundamentals: Sentiment was tempered by December retail sales data, which showed growth moderating to 2.7% year-on-year, down from 6.2% in November as online shopping activity cooled.

Regulatory Outlook: Investors are also digesting a new consultation paper from the Monetary Authority of Singapore (MAS) proposing to increase the share financing threshold for IPOs and rights issues from 80% to 90%.

5. Malaysia: $FTSE Bursa Malaysia KLCI Index (.KLSE.MY)$

The $FTSE Bursa Malaysia KLCI Index (.KLSE.MY)$ started strong last week before ending the week 0.46% lower, as a global technology rout capped earlier gains.

Healthy Consolidation: Analysts viewed the week's mid-week slide to 1,730 as a "healthy pause" following a strong January rally where the index gained 3.6% month-on-month.

Resilient Outlook: Domestic sentiment remains supported by the IMF’s upward revision of Malaysia’s 2026 GDP growth forecast to 4.3%.

Sectoral Leaders: Heavyweight banking stocks like $MAYBANK (1155.MY)$ and utility giant $TENAGA (5347.MY)$ demonstrated resilience during the week, attracting institutional interest despite broader regional volatility.

Prepared by:

Moomoo Singapore
Isaac Lim CMT, CFTe

Chief Market Strategist

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