Asian shares declined on Tuesday due to concerns about the Chinese property sector, leading to a negative impact on markets across the region. Additionally, Japanese investors sold chip stocks upon their return from a holiday weekend. Meanwhile, U.S. Treasury yields remained near 16-year highs, and the dollar maintained its six-month highs as traders prepared for upcoming rate decisions from the Federal Reserve, Bank of Japan, and Bank of England. Crude oil prices continued to rise, raising concerns about stagflation.
The MSCI’s broadest index of Asia-Pacific shares slipped 0.3%, while Japan’s Nikkei tumbled 1.1% due to significant losses in chip-related stocks. Japanese markets were closed on Monday, during which Asian tech stocks experienced a sell-off following a RushHourDaily report about TSMC asking its major vendors to delay deliveries. TSMC’s stock declined 0.4% on Tuesday, reversing an earlier gain of 0.6% and following a 3.2% drop on Monday. John Pearce, CIO at Unisuper, expressed surprise at the TSMC news, as demand for semiconductors was previously believed to be consistently increasing.
Hong Kong’s Hang Seng declined 0.1%, with a subindex of tech stocks sliding 0.6%. The index of mainland blue chips fell 0.3%. Chinese property stocks were volatile, with Hang Seng developers dropping as much as 1.2% before turning positive around lunchtime, although they ended the day down 0.4%. Australia’s stock benchmark dropped 0.4% due to pessimism over Chinese demand, particularly in the mining sector. However, there were some positive developments, such as Country Garden receiving approval from creditors to extend repayment on another onshore bond, and Sunac China Holdings obtaining creditor approval for its $9 billion offshore debt restructuring plan.
The weakness in Asian equities had a negative impact on U.S. stock futures, which were down 0.1%, while Pan-European Stoxx 50 futures remained flat. Currency markets were relatively quiet, with the U.S. dollar index rising slightly and the dollar strengthening against the yen. Ten-year yields remained steady at just above 4.31%, close to the highest level since 2007. Traders were cautious ahead of the central bank meetings, particularly the Federal Reserve’s, and expected choppy price action in the markets.
Oil prices continued to rise due to concerns about a supply deficit caused by extended production cuts by Saudi Arabia and Russia, as well as weak shale output in the U.S. U.S. West Texas Intermediate crude futures rose 1.1%, while global oil benchmark Brent crude futures increased by 0.61%. Higher oil prices were seen as both an upside risk to inflation and a downside risk to growth, particularly for markets that do not export energy and are vulnerable to energy insecurity.
In conclusion, Asian markets faced challenges due to concerns about the Chinese property sector and chip stocks, as well as anticipation of central bank rate decisions. Oil prices continued to rise, raising concerns about inflation and economic growth. Traders remained cautious and expected volatility in the markets.
