Stocks in Asia Slip, Tracking US Tech-Led Declines: Markets Wrap

(Bloomberg) — Equities in Asia declined as investors began pulling back on the artificial-intelligence frenzy that has powered the bull market this year.

Stocks in Japan and South Korea both fell over 2%, with chipmaker SK Hynix Inc. tumbling even with solid earnings. In the US, the S&P 500 slumped 2.3%, its worst showing since December 2022 and one that ended the best stretch without a 2% drop since the start of the global financial crisis. 

The tech-heavy Nasdaq 100 fell 3.7% weighed down by its largest constituents. Alphabet Inc. slid 5% after sinking more resources into its drive to outmatch rivals in AI, with spending higher than analysts expected. Tesla Inc.’s profit miss and the Robotaxi delay spurred a 12% stock plunge. Nvidia Corp fell 6.8%.

“Investors are finally waking up to all that AI spend and realizing it is much more of an expense right now rather than a revenue generator,” said Peter Boockvar at The Boock Report.

The yen steadied Thursday after rallying more than 1% to the strongest levels against the US currency since May in an advance that reflected an unwind in carry trades.

The move is “potentially squeezing the yen short positions, given yen-funded carry trading has been a popular strategy over the last few years,” Saxo Capital Markets’ head of FX strategy Charu Chanana wrote in a note.

The Bank of Japan is likely to stand pat on interest rates for longer in a boost to the nation’s equities, according to BlackRock Inc., which has a high conviction investment view on Japanese stocks. The BOJ meets later this month.

In the bond market, Treasuries gained Thursday in Asian trading after the curve steepened in the previous session on bets the Federal Reserve is close to cutting rates. Australian and New Zealand longer-dated yields rose Thursday.

Former New York Fed President William Dudley called for lower borrowing costs — preferably at next week’s gathering. For many analysts, such a move would be worrisome as it would indicate officials rushing to avoid a recession. Later Thursday in the US, investors will see further evidence of the health of the economy with US GDP and initial jobless claims data being released.

An index of dollar strength was little changed Thursday after a similarly flat Wednesday. The Canadian dollar held declines from the prior day as the Bank of Canada cut rates for a second consecutive meeting and signaled further easing was ahead. In the Philippines, the nation’s central bank suspended currency trading for a second day due to Typhoon Gaemi.

Elsewhere in Asia, South Korea’s economy flipped back into reverse last quarter adding to challenges for policymakers as they struggle to stimulate investment and consumption.

Big Tech Pullback

After driving the rally in stocks for most of 2024, big tech slammed into a wall. Traders rotated from megacaps to lagging parts of the market, spurred by bets on Fed rate cuts and concern AI still needs to pay off.

“Tech’s problem isn’t just that earnings are less than perfect, but the group is still caught up in the violent rotation trade that kicked off with the June CPI,” said Vital Knowledge’s Adam Crisafulli. “Many assumed the anti-tech rotation would be ephemeral and the fact it’s proving durable is compounding anxiety toward the group and spurring additional selling pressure.”

The drubbing in these stocks has seen some of the air come out of valuations. While that’s something that could argue in favor of dip buying, the earnings season is just getting started. Apple Inc., Microsoft Corp., Amazon.com Inc. and Meta Platforms Inc. are all due to report results next week.

In commodities, oil steadied after posting its first gain in five sessions. Gold was little changed early Thursday after a 0.5% drop in the prior session.

Key events this week:

• Germany IFO business climate, Thursday
• US GDP, initial jobless claims, durable goods, Thursday
• US personal income, PCE, consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.3% as of 9:21 a.m. Tokyo time
• Hang Seng futures fell 0.6%
• Japan’s Topix fell 1.8%
• Australia’s S&P/ASX 200 fell 0.9%
• Euro Stoxx 50 futures fell 1.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0838
• The Japanese yen was little changed at 153.77 per dollar
• The offshore yuan was little changed at 7.2711 per dollar
• The Australian dollar fell 0.1% to $0.6572

Cryptocurrencies

• Bitcoin fell 0.8% to $65,511.24
• Ether fell 1% to $3,340.1

Bonds

• The yield on 10-year Treasuries declined one basis point to 4.27%
• Japan’s 10-year yield advanced 1.5 basis points to 1.090%
• Australia’s 10-year yield advanced one basis point to 4.34%

Commodities

• West Texas Intermediate crude fell 0.2% to $77.43 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

©2024 Bloomberg L.P.