Asian shares fell on Thursday as chipmakers stumbled ahead of results from bellwether TSMC, while bonds benefited from another benign reading on US inflation that lessened the risk of an imminent rate hike.
Oil prices, however, kept climbing as hostilities heated up in the Middle East. Washington continued striking Iran after reimposing a naval blockade of its ports, while Tehran warned of an “existential war” with America. Brent crude futures rose 0.6 per cent to $US85.45 ($A122.08) a barrel, adding to this week’s gain of 12 per cent.
All eyes are on the quarterly earnings from Taiwan Semiconductor Manufacturing Co’s (TSMC), the world’s largest manufacturer of advanced AI chips. The company is expected to notch a fifth consecutive quarter of record earnings, with a 59 per cent surge in net profit for April-June.
However, investors are proving hard to please as shares of ASML, the world’s dominant supplier of equipment needed to make high-tech computer chips, finished 0.4 per cent lower even after it raised its 2026 sales forecasts and pledged a capacity boost.
“Seeing aggressive pullback in Memory/Hardware,” Brian Heavey, an equity trader at JPMorgan, said in a note. “Don’t think there’s a smoking gun ‘negative’ headline driving semis/hardware selloff. I think just shows how high the bar is for semis earnings.”
The selling spilled over to Asia. MSCI’s broadest index of Asia-Pacific shares outside Japan slid 1.7 per cent as South Korea’s KOSPI slumped 6.3 per cent on weakness from Samsung, down 8.0 per cent, and SK Hynix, down 11 per cent.
Japan’s Nikkei dropped 3.0 per cent. Taiwanese shares fell 0.5 per cent, while China’s Hang Seng Index gained 1.2 per cent.
South Korea’s central bank raised interest rates for the first time in 3-1/2 years to 2.75 per cent on Thursday to stabilise a slumping won and counter persistent inflationary pressure. The decision was largely as expected.
Wall Street gained overnight as investors rotated out of semiconductors into Magnificent Seven stocks and banks after robust earnings from major lenders, but Asia is more vulnerable to the chip sell-off given its heavier exposure to semiconductor stocks.
Surprisingly soft US PPI data for June added to the benign consumer inflation figures a day earlier, as markets now priced out the risk of an imminent rate hike from the US Federal Reserve this month to just 10 per cent, from 43 per cent earlier in the month.
However, the pullback in inflation is likely only temporary, with oil prices climbing on the renewed Middle East hostilities. The Wall Street Journal reported President Donald Trump is leaning towards expanding US military operations in Iran, including sending ground forces.
Bond investors, however, focused on cooler inflation data. Two-year Treasury yields edged up 2 basis points to 4.1493 per cent, after falling 14 bps over the past two days. Ten-year yields were steady at 4.5593 per cent, having been down 7 bps over the past two days.
That pulled the dollar down, except for against the beleaguered yen. The dollar index was steady at 100.48, after falling 0.4 per cent overnight to the lowest since June 18. The yen hovered at 162.08, not far from the 40-year low of 162.84 as speculators remain wary of Japanese intervention.
Sterling hit two-month highs on expectations that Andy Burnham, who is likely to be named new Labour Party leader on Friday, will pick a fiscally conservative finance minister. The pound was 0.1 per cent higher at $US1.3538 ($A1.9341), after surging 1.0 per cent overnight.
Gold was steady at $US4,055 ($A5,793) an ounce.
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