Asian stocks to fall as tech-led drop gains pace

An electronic stock board outside a securities firm in Tokyo, Japan, on Monday, Sept. 30, 2024. Japanese stocks tumbled after Shigeru Ishiba's surprise victory over Sanae Takaichi in the ruling party's leadership race wrongfooted investors who had bet on a boost from more monetary stimulus from his rival. Photographer: Kiyoshi Ota/Bloomberg

• Asian stocks set to fall as tech selloff deepens and investors rotate sectors
• Nasdaq 100 posts worst two-day drop since October, breaching key technical level
• US-listed Chinese firms and chipmakers see notable declines amid tech concerns

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Asian stocks were set to follow US shares lower as selling in technology stocks gained pace and investors rotated out of the sector and into a broader range of companies.

Equity-index futures indicated losses for Hong Kong and South Korea, while Australian shares opened down. An index of US-listed Chinese firms dropped 2% Wednesday. The Nasdaq 100 saw its worst two-day rout since October, breaching its 100-day moving average, a level seen by some technical analysts as a harbinger for more losses.

Futures contracts for US gauges rose 0.3% in early Asian trading, indicating selling pressure may be easing. Gold and silver advanced Thursday.

Elsewhere, the yen traded at 156.86 to a dollar on Thursday, after four days of losses with elections in Japan set for the weekend. The Bloomberg Dollar Spot Index gained 0.3% on Wednesday.

The tech-heavy selloff reflected further concerns among investors regarding tech valuations, high levels of spending and the potential for AI to cannibalize established software business models. In the latest example of high outlays, Alphabet Inc. shares fell about 2% in extended trading after outlining an ambitious capital spending plan.

“There might be a glass half full and a glass half empty perspective on the moves here,” said Kyle Rodda at Capital.com. “On the one hand, tech stocks are potentially too richly valued. On the other hand, the strength in the market is broadening out in a sign of improving economic fundamentals.”

Rotation out of tech was the main theme during the US session and software firms saw another wave of selling, but moves were bigger in chipmakers. A Bloomberg gauge of the so-called Magnificent Seven companies fell 1.8%.

Bitcoin hovered near $73,000, with prediction traders betting the world’s most popular cryptocurrency will drop below $65,000. Treasuries were mixed on Wednesday, with the short-end of the curve rallying. The US two-year yield fell two basis points while the 10-year ended one basis point higher.

The yen fell 0.7% to around 157 per dollar Wednesday, while the pound and euro were also softer ahead of interest rate decisions due later Thursday. The European Central Bank and Bank of England are expected to leave rates unchanged.

What Bloomberg strategists say...

What looks like a brutal equity rotation away from concentration is actually proving to be a bright spot for the broader market. US equities are experiencing a rotation that in the moment seems painful, but was ultimately inevitable.

— Brendan Fagan, Macro Strategist. For full analysis, click here.

Meanwhile, clear signs of momentum behind the tech sell-off emerged. The iShares MSCI USA Momentum Factor ETF plunged 3.7%, while a Goldman Sachs Group Inc. basket that goes long high-beta momentum names and short the opposite tumbled 9.8%.

“The news for the software stocks gets worse by the day,” said Matt Maley at Miller Tabak. “However, no matter where they are headed over the intermediate and long-term, they are getting poised for a nice bounce over the near-term. Investors should be careful about negative bets over the short-term.”

In the US, service providers saw the strongest back-to-back growth since 2024 as business activity picked up even as employment barely expanded. While companies added fewer jobs than expected, recent data has pointed to limited layoffs.

Elsewhere, US President Donald Trump and President Xi Jinping of China discussed trade and geopolitical flashpoints, including Taiwan, during a Wednesday call ahead of a planned face-to-face meeting later this year.

In commodities, oil slipped early Thursday after gaining in the previous session as conflicting reports on the status of nuclear talks between the US and Iran clouded the outlook on whether Washington will proceed with military strikes. Gold remained below $5,000.