Major markets in Asia felt the impact of US tech stock pullbacks on Friday, as lackluster corporate results from American tech giants led to cautious trading across the region. While oil prices surged on heightened tensions in the Middle East, mixed economic signals from China provided some positive news for investors.
Asian Markets Slide as US Tech Weakness Spreads Overseas
A region-wide equity index saw declines, with Japanese, South Korean, and Australian markets following the lead of US tech stock losses. The S&P 500 and Nasdaq 100 dropped 1.9% and 2.4% respectively on Thursday, marking their steepest fall since early September. Investor reactions were tied closely to underwhelming earnings reports from key US tech companies, which have been dominant players in the recent bull market.
- Japan’s Topix declined by 1.3%, reflecting similar struggles in Tokyo’s tech-heavy sectors.
- Australia’s S&P/ASX 200 also saw a 0.9% fall as investors assessed the performance of local and regional companies with ties to US tech.
- In South Korea, SK Hynix Inc. and Taiwan Semiconductor Manufacturing Co. (TSMC) dropped sharply, exacerbating concerns over the downstream effects of weaker demand for semiconductors, especially given their reliance on US tech companies as major clients.
The pullback illustrates broader concerns over how Asian suppliers, many of which heavily depend on US demand, could be impacted by underperformance among their American counterparts. A growing number of Asian companies are intertwined in supply chains with giants like Microsoft, Meta, and Apple, so their earnings have a sizable effect on markets worldwide.
US Earnings Fall Short, Adding Pressure on Global Tech
The steep losses in the Nasdaq were spurred by weaker-than-expected results from Microsoft Corp. and Meta Platforms Inc. Microsoft, typically a bellwether for tech, reported declines in cloud computing revenue growth, a segment investors were closely watching. Meta’s mixed results in advertising revenue further fueled investor concerns about sustainability in tech growth.
Meanwhile, Apple Inc. reported softer-than-anticipated sales in China, a critical market for its products, which led to a slight dip in post-market trading on Thursday. Amazon.com Inc. and Intel Corp., however, offered some relief with after-hours gains, thanks to positive forward-looking statements that helped US stock futures to make small gains by early Friday.
Asian Market Reactions to US Tech Performance
Asian tech stocks saw the brunt of the downturn, particularly semiconductor companies in Taiwan and South Korea. The weaker results from American tech companies left these Asian firms vulnerable, especially since demand for chips, which are key to nearly every tech device, has been slowing down.
The drop in Taiwan’s TSMC coincided with the reopening of Taiwanese markets following a typhoon shutdown. SK Hynix, another major player in the chip sector, saw a significant sell-off early in the trading session, reflecting broader skepticism about the global tech outlook in the near term.
China’s Manufacturing Stabilizes Amid Economic Stimulus
Offering a slight counterbalance to the negative sentiment, China’s manufacturing sector presented a surprise uptick in October. According to the Caixin Manufacturing PMI, activity in China unexpectedly increased, driven in part by Beijing’s ongoing stimulus measures designed to bolster the economy. The PMI reading offered a glimmer of hope for investors concerned about China’s sluggish economic recovery, especially after a series of aggressive policies by Chinese authorities to stimulate growth.
China’s manufacturing resilience provided some relief, with the Shanghai Composite remaining relatively flat and Hong Kong’s Hang Seng Index rising 0.6%. As the country pushes forward with recovery measures, there is optimism that continued strength in manufacturing may support Chinese stocks and help mitigate some of the effects of global tech market volatility.
Oil Markets Rally on Escalating Middle East Tensions
Amid the turbulence in equities, oil prices surged on renewed fears of Middle East conflict. A report from Axios on Thursday indicated that Iran might be planning a retaliatory strike on Israel via its allied militias in Iraq, a development that quickly impacted global oil markets.
- West Texas Intermediate (WTI) rose 1.8%, reaching $70.51 per barrel as investors braced for potential supply disruptions from the region. This uptick reflects oil’s heightened sensitivity to geopolitical instability, especially in the Middle East, which remains a critical source of global oil production.
Global Currency and Bond Markets Steady
Treasuries saw only modest gains on Thursday, doing little to counter the severe October losses that left US Treasuries experiencing their worst month in two years. Concerns over persistently high interest rates continue to weigh on bond markets, as investors reevaluate expectations for rate cuts in the near future.
- US 10-year Treasury yields were nearly unchanged at 4.28%, while Japan’s 10-year yield rose by 2.5 basis points to 0.96%.
- Australia’s 10-year yield also climbed five basis points to 4.55%, underscoring persistent volatility as investors weighed the influence of the upcoming US presidential election and its potential impact on fiscal policy.
Elections, Policies, and Market Uncertainty
The uncertainty surrounding the upcoming US presidential election has also become a central concern for Asian investors. According to Ken Wong, Asian equity portfolio specialist for Eastspring Investments, the focus remains on potential policy changes post-election rather than the outcome itself. On Bloomberg Television, Wong noted, “We don’t know whether it will be Trump or Harris that will win next week. It’s going to be more important to see post-election around policies.”
UK Markets Face Inflation Worries Post-Budget
The British pound remained steady Friday, though it had weakened on Thursday as UK stocks and bonds sold off on inflation fears following the Labour government’s latest budget. Investor sentiment around UK assets remains fragile, particularly as the government’s fiscal plans have raised concerns about inflationary pressures on the British economy.
China’s Property Market Shows Early Signs of Recovery
In another positive development, China’s residential property sales saw their first year-over-year increase in 2024, bolstered by recent government actions aimed at stabilizing the real estate sector. Policies aimed at easing down payment requirements and reducing mortgage rates have provided critical support to this sector, which has been a long-standing pillar of China’s economic growth.
The increase in property sales is a sign that Beijing’s targeted measures might be taking effect, though analysts remain cautious about the broader challenges facing China’s real estate market, especially as developers navigate tight liquidity conditions.
Key Data to Watch: Employment and Inflation Reports
In the US, investors are keeping a close eye on Friday’s nonfarm payroll report, which is expected to show a gain of around 100,000 jobs in October. A strong report could reinforce views that the Federal Reserve may hold off on rate cuts in the near term, potentially impacting interest rate-sensitive sectors and influencing global markets.
The Fed’s preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Index, posted its largest monthly gain since April, potentially bolstering the case for a slower pace of rate cuts as the Fed continues to prioritize full employment over immediate inflation concerns.
Commodity and Cryptocurrency Movements
Commodity markets and cryptocurrencies exhibited mixed performances on Friday:
- Gold retreated as some investors opted to lock in gains following the metal’s recent rally. Spot gold fell slightly to $2,747.63 per ounce, remaining near record highs amid strong demand for safe-haven assets.
- Bitcoin and Ether each posted marginal declines, with Bitcoin slipping by 0.3% to $69,741.95 and Ether falling 0.4% to $2,508.52, as digital assets saw some profit-taking.
Market Snapshot as of Friday Morning in Asia
| Index/Asset | Change |
|---|---|
| S&P 500 Futures | Flat |
| Japan’s Topix | -1.3% |
| Australia’s S&P/ASX 200 | -0.9% |
| Hong Kong’s Hang Seng | +0.6% |
| Shanghai Composite | Flat |
| West Texas Intermediate Crude | +1.8% to $70.51 |
| Gold | +0.1% to $2,747.63 |
| Bitcoin | -0.3% |
| Ether | -0.4% |
