Asian Stocks Under Pressure, Chipmakers Concerned: Market Roundup

(Bloomberg) - Asian stocks opened under pressure after U.S. stocks extended their longest losing streak since January.

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Equity futures on carriers in Japan, Hong Kong and Korea all showed early losses, while those in Australia and China rose. U.S. futures were little changed after Wednesday's fourth consecutive day of declines in the spot market, with the Standard & Poor's 500 Index (S&P 500) dropping more than 4% from its all-time high set last week.

Asian chipmakers such as Taiwan Semiconductor Manufacturing Co., Tokyo Electron Co. and SK Hynix Co. will be closely watched in early-banking deals. ASML Holding NV, Europe's most valuable technology company, said orders fell in the first quarter and its sales in China may be hampered by U.S. export enforcement measures. Nvidia Corp. led declines in U.S. large-cap stocks.

Tony Sycamore, a Sydney-based market analyst at IG Australia, said ASML's earnings report "is a small warning ahead of some of the giant tech stocks' earnings announcements next week."" Semiconductor stocks may be a bit nervous. It's going to be a tough day for any stock with semiconductor risk exposure.

Investors are increasingly skeptical about how much more U.S. stocks can rise after the first quarter's 10% rally, the strongest start to 2019. The latest round-trip comes as U.S. data suggests the economy continues to strengthen.

The day after Jerome Powell threw cold water on rate cut bets, the Treasury market saw a rock-bottom buy, with two-year yields dropping further below 5% and a $13 billion sale of 20-year Treasuries attracting solid demand.

"The U.S. central bank is still on track to cut rates twice this year, likely starting with the September meeting," said Solita Marcelli, chief investment officer for the Americas at UBS Group AG's wealth management unit." This means that the outlook for high-quality bonds remains positive and attractive, and that recent losses in fixed income are likely to be temporary.

The U.S. dollar fell for the first time in six days on Wednesday as officials in Japan and South Korea continued to express concern about the decline of their currencies. So far this year, the yen is down nearly 9% against the dollar, and the won is down about 7% against the dollar.

Read more Yellen acknowledges Japan and South Korea's concerns about yen and won

The equity risk premium in the U.S. stock market (a measure of the difference between the expected return on stocks and bonds) is now deep in negative territory, a situation not seen since the early 21st century.

While this is not necessarily a negative indicator for the stock market, it is entirely dependent on the economic cycle. Lower premiums can be taken as a promise of future corporate profit growth, but they can also be taken as a sign that a bubble is forming.

Strategists at HSBC, led by Max Kettner, believe that the fundamentals of the stock market and the trend in technical flour still seem to be supportive, suggesting that the recent correction should be temporary.

They wrote: "Sentiment and positioning are not sending warning signals, as much as the real money investors have recently begun to expand their constructive stance on the stock market.

Elsewhere, crude oil plunged more than 31 TP3T and gold fell 0.91 TP3T on Wednesday on the back of weak industrial data from China and an increase in U.S. crude inventories.

Important events this week

• Taiwan Semi-Conductor Financial Report, Thursday

• Conf. US Federal Reserve Leading Index, Pending Home Sales, Initial Jobless Claims, Thursday

• On Thursday, Federal Reserve Governor Michelle Bowman gave a speech

• On Thursday, New York Fed matron John Williams spoke.

• On Thursday, Atlanta Fed matron Rafael Bostic resonance speech

• Dave Ramsden, Deputy Governor of the Bank of England, and Joachim Nagel, member of the ECB's Günther Committee, spoke on Friday.

• Chicago Fed matron Austan Goolsbee to speak on Friday

Main Market Movements

stock (market)

• As of 7:11 a.m. Tokyo time, S&P 500 futures were little changed.

• Hang Seng Index futures down 0.5%

• S&P/ASX 200 futures rose 0.3 percent.

Currency

• Euro exchange rate little changed at US$1.0674

• The yen was little changed at 154.31 yen per US dollar.

• The offshore RMB exchange rate was little changed at RMB 7.2438 per US dollar.

• AUD little changed at $0.6436

Encryption Currency

• Bitcoin up 0.7% to $61,273.6

• Ether rises 0.7% to $2993.24

debentures

• The yield on the 10-year Treasury note fell 8 basis points to 4.59 percent.

bulk commodities

• West Texas Kerosene Intermediate crude up 0.21 TP3T to $82.85 per barrel

• Spot gold rose 0.2% to $2,365.90 per ounce

This story was produced with the help of Bloomberg Automation.

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