The yen was steady at 149.155 per dollar, but is down 3.6 percent in October as the Bank of Japan’s dovish stance drags on the currency. (Photo: Shutterstock)
Asian shares fell on Wednesday after disappointing earnings from Europe’s biggest tech company ASML dragged down chip stocks around the world, while expectations that the Federal Reserve will take a modest rate cut underpinned the dollar.
Also weighing on the market were lackluster earnings from French luxury giant LVMH, which showed demand in China for luxury goods worsened, denting some of the enthusiasm around China fueled by stimulus measures.
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South Korean technology stocks fell 0.6 percent, while chip stocks led Japan’s Nikkei to a 1.8 percent drop. Taiwan 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 probably wondering how exposed to risk they really want to be, given that there are event risks and the US election is coming up on November 5.
“I expect investors to become increasingly nervous as we get closer to November 5 and eager to book profits at frothy levels.”
ASML, whose clients include AI chip maker TSMC, logic chip makers Intel and Samsung, as well as memory chip specialists Micron and SK Hynix, forecast lower-than-expected sales for 2025.
The Dutch chip equipment maker said that despite the rise of AI-related chips, other parts of the semiconductor market are weaker for longer than expected, leading customers to be cautious.
“AMSL’s numbers were 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 US officials have been considering implementing a limit on AI chip export licenses to specific countries also weighed on sentiment.
The bad 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 turns to Thursday, when China will hold a press conference to discuss promoting “steady 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 shift appears to be here to stay,” HSBC strategist Steven Sun said in a report. .
DOLLAR RISE
On the macroeconomic front, investors remain captivated by US rates and changing expectations for rate cuts in the wake of data that has shown the US economy is resilient and inflation is moving a little further.
This has kept traders undecided about how deep the rate cuts will be in the near term, with traders estimating 46 basis points (bps) of easing this year. The Federal Reserve began its easing cycle with an aggressive 50 basis point cut in September.
Markets attribute a 96 percent probability of a 25 bp cut by the Federal Reserve next month, the CME FedWatch tool showed, compared with a 50 percent probability a month earlier, when investors were considering another 50 bp cut by the US central bank.
As a result, the dollar has risen in recent weeks, with the US dollar index, which measures the US unit against its main rivals, at 103.24, hovering around its highest levels since early August.
The euro was hovering around two-month lows and last hit $1.0887 in early trading ahead of the European Central Bank’s policy meeting on Thursday, where the central bank is expected to cut rates again.
The yen was steady at 149.155 per dollar, but is down 3.6 percent in October as the Bank of Japan’s dovish stance drags on the currency.
In commodities, oil prices held steady after sharp declines in the previous session as investors grappled with uncertainty around tensions in the Middle East and what they mean 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 modified by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First published: October 16, 2024 | 09:29 IS
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