Asian Stocks Fall on Tech Rout Contagion, Global Uncertainty

Asian shares are set to end the week on a sour note, as uncertainty across the geopolitical landscape and in major economies added to headwinds for investors, despite the beginning of the global rate easing cycle.

Key Points:

• Market Turbulence:

  • The week has been turbulent with a tech sell-off sparked by deepening Sino-US trade tensions, uncertainty over US President Joe Biden's presidential race prospects, disappointing Chinese economic data, and a lackluster third plenum outcome.

• Market Reactions:

  • MSCI's broadest index of Asia-Pacific shares outside Japan slid 0.1%, heading for its worst week in over a month with a 2.4% loss.
  • Japan's Nikkei fell to a more than two-week low, down 0.1%, extending a sharp 2.4% fall from the previous session, and set for a 2.7% weekly decline, its steepest in three months.

• Tech Sector Struggles:

  • South Korea's tech-heavy Kospi and Taiwanese stocks both eased more than 1%.
  • South Korean chipmaker SK Hynix was down 0.7%, while Japan's Tokyo Electron rebounded 2.6% after an 8.75% drop on Thursday.
  • Shares in Taiwan Semiconductor Manufacturing Company Ltd (TSMC) fell 1.3%, despite posting better-than-expected earnings and raising its full-year revenue forecast.

• China's Economic Outlook:

  • Investors were disappointed with the lack of detailed implementation steps from China's recent plenum.
  • Chinese blue-chips fell 0.08%, the Shanghai Composite Index edged 0.07% lower, and Hong Kong's Hang Seng Index slid 1.5%.

• Currency and Rates Focus:

  • The euro fell 0.4% to US$1.0893 after the European Central Bank kept rates on hold but hinted at a possible September cut.
  • The dollar was stronger, distancing itself from a four-month low, supported by strong US manufacturing data and jobless figures.
  • The yen was firmer at 157.31, aided by suspected intervention from Japanese authorities and higher core inflation, raising expectations for a Bank of Japan rate hike.
  • Sterling dipped 0.03% to US$1.2942, and the Australian dollar fell 0.12% to US$0.6698.

• Commodities:

  • Oil prices fell, with Brent crude futures easing 0.58% to US$84.62 a barrel and US crude futures sliding 0.81% to US$82.15 per barrel.
  • Gold fell 0.8% to US$2,425.19 an ounce, retreating from a record high hit earlier this week.

Outlook: The Asian markets are experiencing a challenging week due to geopolitical uncertainties and economic data, impacting investor sentiment. Despite the global rate easing cycle, the tech sector and major economies' outlook remain focal points for market movements.