Nasdaq poised for slight rise post TSMC earnings beat: Markets Update

Asian Markets Plunge Amid Tech Selloff and US Restrictions

Asian markets experienced a significant decline on Thursday, driven by a broad selloff in the tech sector over fears of tighter US restrictions on chip sales to China. This downturn was led by Japanese and South Korean stocks, with the Topix index falling by up to 1.5%. Tokyo Electron Ltd. was hit the hardest, plummeting nearly 11% for the second consecutive day, while Taiwan Semiconductor Manufacturing Co. saw a drop of up to 4.3%. Meanwhile, shares in Hong Kong and mainland China saw fluctuations. In contrast, US futures made slight gains after the S&P 500 fell by 1.4% and the Nasdaq recorded a 2.9% drop, marking its worst day since 2022.

The latest slump in chip stocks was triggered by reports that the Biden administration is considering severe restrictions if companies like Tokyo Electron and ASML continue to supply China with advanced semiconductor technology. This news followed a successful first half of the year for tech megacaps, which had pushed the market higher but now face a challenging setup for the remainder of 2024.

"Market participants are unwinding positions in tech stocks due to concerns over further trade restrictions on China impacting the sector's demand outlook," said Jun Rong Yeap, a market analyst at IG Asia. "Given that the 'laggard trade' theme is just beginning, there might be more room for tech selloff."

US and European Markets React

On Wednesday, major US chip firms such as Nvidia Corp., Advanced Micro Devices Inc., and Broadcom Inc. led a closely watched semiconductor index down nearly 7%, its biggest slide since 2020. Similarly, in Europe, ASML Holding NV tumbled by 11% despite reporting strong orders.

"I wouldn't immediately abandon the tech trade, but there are concerns over valuations," said John Woods, Chief Investment Officer for Asia at Lombard Odier, on Bloomberg TV. "There could be opportunities outside the tech sector."

Currency and Treasury Updates

The yen weakened after a 1.4% rise against the dollar on Wednesday. The Bank of Japan is expected to avoid raising interest rates this month and will likely cut its bond buying to mitigate yen weakness, according to a former executive director at the central bank. In the US, the Federal Reserve's Beige Book reported slight economic growth and cooling inflation, with Fed Governor Christopher Waller indicating that the Fed is nearing a point where rate cuts might be considered, although it's not yet imminent.

Regional and Corporate Updates

In regional economic data, Australia surpassed expectations by adding more than twice the number of jobs anticipated last month, and Japan's exports increased for the seventh straight month in June. In China, President Xi Jinping is preparing to reveal his long-term economic vision as a major reform conclave concludes. In the corporate world, Warner Bros Discovery Inc. is contemplating options to boost its share price, including splitting its streaming and studio businesses from its legacy TV operations, according to the Financial Times.

Commodities, Bonds, and Cryptocurrencies

West Texas Intermediate crude rose 0.7% to $83.44 per barrel, following a 2.6% increase on Wednesday amid concerns about Canadian wildfires threatening significant oil production. Spot gold climbed 0.4% to $2,467.51 an ounce. The yield on 10-year Treasuries increased by one basis point to 4.17%, while Australia's 10-year yield remained stable at 4.25%. Bitcoin and Ether saw slight increases, trading at $64,690.58 and $3,424.66 respectively.

Key upcoming events include the ECB's rate decision and several US economic indicators, such as initial jobless claims and Fed speaker engagements, which could further impact market movements.