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The yen held steady at 149.155 per dollar, but is down 3.6 percent in October as the Bank of Japan’s dovish stance weighs on the currency. (Photo: Shutterstock)
Asian stocks fell on Wednesday after disappointing results from Europe’s largest technology company, ASML, dragged down chip stocks across the world, while expectations that the Federal Reserve would enact a modest rate cut supported the dollar.
Poor results from French luxury giant LVMH, which showed a deterioration in demand for luxury goods in China, also weighed on the market, partly dampening enthusiasm for stimulus measures towards the China.
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Technology-heavy South Korean stocks fell 0.6 percent, while chip stocks led Japan’s Nikkei down 1.8 percent. Taiwanese stocks fell 1.2 percent. That left MSCI’s broadest index of Asia-Pacific shares outside Japan down 0.32 percent.
Matt Simpson, senior market analyst at City Index, said investors are likely wondering how much risk exposure they actually want, given risk events and the looming U.S. election on Nov. 5.
“I expect investors to become increasingly nervous as we approach November 5 and want to book profits at frothy levels.”
ASML, which counts AI chipmaker TSMC, logic chipmakers Intel and Samsung as well as memory chip specialists Micron and SK Hynix among its customers, forecasts lower-than-expected sales for 2025.
The Dutch chip equipment maker said that despite the rise in AI-related chips, other segments of the semiconductor market were weaker than expected, leading to customer caution.
“The AMSL numbers are not good and suggest that all is not well in semiconductor chips outside of AI,” said Nick Ferres, CIO at Vantage Point Asset Management in Singapore.
A Bloomberg News report that U.S. officials were considering capping AI chip export licenses to specific countries also weighed on sentiment.
The gloomy mood sent Chinese stocks tumbling in early trading as investors awaited concrete details on stimulus plans. The blue-chip CSI300 index fell 0.6 percent, while Hong Kong’s Hang Seng index was down 0.7 percent in early trading.
Investors’ attention now shifts to Thursday, when China will hold a press conference to discuss promoting the “stable and healthy” development of the real estate sector.
“We believe investors should view the policy announcements since September 24 as an integrated plan rather than isolated messages – the policy pivot appears to be here to stay,” HSBC strategist Steven Sun said in a report.
DOLLAR ON THE RISE
On the macroeconomic front, investors remain fascinated by U.S. rates and shifting expectations for rate cuts following data that showed the U.S. economy was resilient and inflation was set to edge up.
This has kept traders uncertain about the extent of short-term rate cuts, with traders pricing in an easing of 46 basis points (bps) this year. The Fed began its easing cycle with an aggressive 50 basis point cut in September.
Markets assign a 96 percent probability to a 25 basis point cut from the Fed next month, the CME FedWatch tool showed, compared with a 50 percent probability a month earlier when investors were considering a further reduction of 50 basis points from the American central bank.
As a result, the dollar has surged in recent weeks, with the U.S. Dollar Index, which measures the U.S. currency against its major rivals, at 103.24, hovering near its highest levels since early August.
The euro remained around a two-month low and last hit $1.0887 in early trading ahead of Thursday’s European Central Bank policy meeting, at which the central bank is expected to reduce rates again.
The yen held steady at 149.155 per dollar, but is down 3.6 percent in October as the Bank of Japan’s dovish stance weighs on the currency.
In the commodities sector, oil prices remained stable after sharp declines in the previous session, as investors faced uncertainty surrounding tensions in the Middle East and their implications for global supply. [O/R]
Brent crude oil futures rose 0.4 percent to $74.56 a barrel. U.S. West Texas Intermediate crude futures rose 0.5 percent to $70.93 a barrel.
(Only the title and image of this report may have been reworked by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First publication: October 16, 2024 | 9:29 a.m. STI