Jamie McGeever
(Reuters) – Future outlook for Asian markets.
A wave of profit-taking in big U.S. technology and AI stocks appears to be gaining momentum and could dampen investor sentiment and risk appetite in Asia on Tuesday, even if it is offset by a return to cheaper, hard-hit sectors.
The Dow Jones Industrial Average's rise to a one-month high on Monday will certainly be welcomed as the Nasdaq falls for a third straight day, but caution may prevail ahead of U.S. inflation data on Friday, the final trading day of the quarter.
Meanwhile, macroeconomic conditions at the start of the week look quite favorable for Asian and emerging markets, with U.S. Treasury yields slightly lower on Monday and the dollar suffering its biggest drop in two weeks.
The regional economic calendar is light on content on Tuesday, with key indicators including Malaysian consumer price inflation, Japan's services sector producer prices, the latest consumer confidence indicators from South Korea and Australia, and trade data from Hong Kong.
The tone for Asian markets on Tuesday may be set by the storm brewing in the technology sector. Nvidia shares fell 6.7% on Monday, bringing their decline to 16% over the past three days, weighing heavily on semiconductors and technology stocks in general.
Taiwan's main stock index fell about 2% on Monday, its biggest drop in two months, while blue-chip stock Taiwan Semiconductor Manufacturing Co. (TSMC) fell more than 3%. That was before Nvidia shares tumbled on Tuesday.
Hong Kong's Hang Seng Technology Index hit a two-month low on Monday but has since recovered most of its losses to finish down just 0.6%. Again, weakness in U.S. tech and semiconductor stocks on Monday, especially the sharp sell-off at the close, does not bode well for Asian tech stocks on Tuesday.
Returning to the macroeconomic world, Japanese policymakers discussed a short-term interest rate hike, urging them to do so “without too much delay” to bring inflation back under control, according to minutes from the Bank of Japan's last meeting on Monday.
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But currency traders seem unimpressed. The yen strengthened slightly on Monday, but only slightly, and remains within reach of the 160 yen to the dollar level that recently forced Japanese authorities to spend billions of dollars to buy yen.
The next big inflation reading from Japan is due to be released on Friday as Tokyo's consumer price index, which is usually seen as a good barometer of price pressures nationwide, but a weakening yen and a 12% increase in oil prices over the past three weeks may be making officials nervous.
Meanwhile, a Reuters survey of economists expects Malaysia's annual inflation rate to accelerate slightly to 1.9 percent in May from 1.8 percent in April.
Here are some key developments that could give further direction to the market on Tuesday:
– Japan Services Producer Price Index (May)
– Malaysian CPI (May)
– Australian Consumer Confidence (June)
(Reporting by Jamie McGeever and Josie Kao Editing)
