Asian stocks decline as chip selloff gains steam

Asian stocks decline as chip selloff gains steam

Asian equities fell Thursday, as a global selloff in technology stocks deepened on concerns over tighter US restrictions on chip sales to China.

Shares in Japan and South Korea dropped, with the Topix falling as much as 1.5%, weighed down by a stronger yen and further fallout from heavy selling in chipmakers around the world. Tokyo Electron Ltd. faced the brunt of selling for a second day, dropping almost 11%.

Hong Kong and mainland Chinese stocks fluctuated in early trade, with the Hang Seng Tech Index down as much as 1.2%. US futures drifted higher after the S&P 500 fell 1.4% and the Nasdaq dropped 2.9%, its worst day since 2022, on Wednesday.

US chip giants Nvidia Corp., Advanced Micro Devices Inc. and Broadcom Inc. drove a closely watched semiconductor gauge down almost 7% — the biggest slide since 2020 — while in Europe, ASML Holding NV tumbled 11% even after the Dutch giant reported strong orders.

The Biden administration told allies it’s considering severe curbs if companies like Tokyo Electron and ASML keep giving China access to advanced semiconductor technology.

The possibility of new chip restrictions “could indeed create the kind of selling that could be the catalyst for a tradable correction in the stock market,” said Matt Maley at Miller Tabak + Co. “Broad indices have become very overbought.”

Treasuries were steady in early Asian trading after small moves on Wednesday. The Federal Reserve’s Beige Book showed slight economic growth and cooling inflation. Fed Governor Christopher Waller said the Fed is getting “closer” to cutting rates, but is not there yet. Australian and New Zealand bonds were little changed.

An index of dollar strength traded around the lowest level in two months. The yen was stronger after rising 1.4% against the greenback in the prior session to trade at a level not seen since early June.

The Bank of Japan is unlikely to raise interest rates this month and will instead cut its bond buying a little more than expected to avoid any fueling of yen weakness, according to a former executive director at the central bank.

The Biden administration is in a tenuous position. US companies feel that restrictions on exports to China have unfairly punished them and are pushing for changes. Allies, meanwhile, see little reason to alter their policies when the presidential election is just a few months away.

Meanwhile, Donald Trump, speaking in an interview with Bloomberg Businessweek, questioned whether the US has a duty to defend Taiwan — a major hub of semiconductor manufacturing.

“Markets may view the possibility of a second Trump Administration positively,” said Sarah Bianchi at Evercore ISI. “However, it is worth noting that the core of the Trump policy agenda this time – raising tariffs and restricting immigration while largely extending existing tax cuts – points in the direction of lower growth and higher inflation.”

The tech underperformance is coming after a first half which saw megacaps propel the market higher, stretching their valuations and leaving them with a tougher setup for the rest of 2024.

“Much of this year’s equity gains have come from a handful of names currently under direct threat from the political arena,” said Jose Torres at Interactive Brokers. “An important question is if the rest of the market, which generally lacks thrilling tales on a relative basis, can offset the waning momentum in ‘Magnificent Seven’ stocks.”

In Asia, data set for release includes June trade data for Japan, labor market figures for Australia and unemployment in Hong Kong. In China, President Xi Jinping will unveil his long-term vision for the economy as he wraps up a twice-a-decade conclave on reform.

West Texas Intermediate, the US oil benchmark, gained again after rising 2.6% Wednesday as investors digested news of wildfires in Canada that threaten 400,000 barrels a day of the country’s oil production.

ECB rate decision, Thursday

US initial jobless claims, Philadelphia Fed manufacturing, Conference Board LEI, Thursday

Fed’s Mary Daly, Lorie Logan and Michelle Bowman speak, Thursday

Fed’s John Williams, Raphael Bostic speak, Friday

Some of the main moves in markets:

S&P 500 futures rose 0.2% as of 9:05 a.m. Tokyo time

Hang Seng futures fell 0.3%

Japan’s Topix fell 1.4%

Australia’s S&P/ASX 200 fell 0.1%

Euro Stoxx 50 futures fell 1.1%

The Bloomberg Dollar Spot Index was little changed

The euro was unchanged at $1.0939

The Japanese yen rose 0.3% to 155.76 per dollar

The offshore yuan was little changed at 7.2681 per dollar

Bitcoin fell 0.5% to $64,175.71

Ether fell 0.6% to $3,394.95

The yield on 10-year Treasuries was little changed at 4.16%

Australia’s 10-year yield declined two basis points to 4.23%

Commodities

West Texas Intermediate crude rose 0.3% to $83.11 a barrel

Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.