Asian equities slide as chip rout and oil prices hit sentiment
A broad semiconductor selloff and rising oil prices driven by Middle East tensions dragged Asian equities lower, raising fresh concerns about tech valuations and the inflation outlook.
The MSCI Asia Pacific Index fell 0.3% in early trading, led by declines in Japan and Australia, while South Korean markets remained closed for a public holiday. The regional risk-off tone followed a turbulent session for US technology stocks, where a gauge of semiconductor giants slumped more than 4% on Thursday.
Investors are actively questioning whether current tech valuations can support the massive capital expenditure plans announced by industry leaders. Taiwan Semiconductor Manufacturing Co.’s American depositary receipts dropped 2% after a higher spending forecast overshadowed a solid operational outlook. Nasdaq 100 futures fell an additional 0.5%, extending the underlying index's 1.6% Thursday drop. Sentiment was further hit by Netflix Inc., which fell over 8% in extended trading after forecasting a second consecutive quarter of slowing sales growth.
The semiconductor sector's vulnerability is now dictating broader market direction. “The action in the chip stocks going forward is still the most important issue for the stock market,” said Matt Maley, chief market strategist at Miller Tabak. “They are definitely showing some meaningful cracks, so they’re going to have to see a strong and sustainable rebound soon or it will raise some real warning flags.”
Geopolitical risks complicate rate outlook
Beyond the tech sector, escalating geopolitical tensions are disrupting commodity markets and complicating the macroeconomic picture. Brent crude traded just under $85 a barrel, recouping earlier losses as hostilities across the Middle East intensified and shipping traffic through the Strait of Hormuz slumped.
The rally in oil prices has revived concerns that sticky inflation could prompt the Federal Reserve to raise interest rates before the year concludes. Treasury yields edged higher on Thursday alongside modest gains in the US dollar, pricing in the risk of tighter monetary policy.
Still, fundamental economic conditions in the US continue to show resilience against these mounting headwinds. “Despite challenges, consumers are still spending and the labor market shows no signs of cracking,” said Ellen Zentner at Morgan Stanley Wealth Management. “This type of data won’t move the Fed’s needle either way, but it underscores the ongoing resilience of the US economy.” In regional bond markets, government debt edged lower in Australia and New Zealand, while US Treasuries were steady.
