A preview of the day ahead in Asian markets.
The wave of profit-taking in US technology and artificial intelligence stocks appears to be gaining momentum, which could depress investor sentiment and risk appetite in Asia on Tuesday, even if it is offset by a rotation towards less expensive and battered sectors. The rise in the Dow Jones, which reached its highest level in a month on Monday, while the Nasdaq fell for the third time, will of course be welcomed. But ahead of Friday’s U.S. inflation numbers, which is also the last trading day of the quarter, caution may prevail.
Otherwise, the macroeconomic backdrop at the start of the week looks quite favorable for Asian and emerging markets – Treasury yields fell slightly on Monday and the dollar saw its biggest decline in almost two weeks.
Tuesday’s regional economic calendar is light, with highlights including consumer price inflation in Malaysia, services sector producer prices in Japan, the latest consumer confidence readings in South Korea and in Australia, and trade figures in Hong Kong.
The tone for the Asian market on Tuesday could be set by the storm brewing in the technology sector. Nvidia shares fell 6.7% on Monday, bringing their decline over the past three days to 16%, and weighing heavily on semiconductor and technology sector stocks in general.
Taiwan’s benchmark index lost nearly 2% on Monday, its biggest decline in two months, and blue-chip Taiwan Semiconductor Manufacturing Co lost more than 3%. And this was before the collapse of Nvidia on Tuesday.
Hong Kong’s Hang Seng Tech index hit a two-month low on Monday, before recovering most of its losses to finish down just 0.6%. Once again, the weakness in US technology and semiconductor stocks on Monday – particularly the acceleration of the fall at the close – does not bode well for the sector in Asia on Tuesday. On the macroeconomic front, minutes of the latest Bank of Japan meeting on Monday showed that Japanese policymakers discussed raising short-term interest rates, with one advocating an increase “without too much delay” to help bring down inflation. Forex traders, however, do not seem impressed. The yen appreciated slightly on Monday, but only marginally, and remains within reach of the $160 level that recently prompted Japanese authorities to spend billions of dollars on yen-buying interventions. The next important figure for inflation in Japan will be consumer price inflation in Tokyo on Friday. This figure is generally considered a good barometer of domestic price pressures and, given the weakness of the yen and the 12% rise in oil prices over the past three weeks, it may be that the authorities are getting impatient.
Annual inflation in Malaysia, meanwhile, is expected to accelerate slightly to 1.9% in May, from 1.8% in April, according to a Reuters poll of economists.
Here are the main developments that could move the markets on Tuesday:
– IPP of services in Japan (May)
– Malaysia Consumer Price Index (May)
– Australian consumer sentiment (June)
