Asian equity markets largely declined, mirroring a sharp sell-off in US semiconductor stocks. Tech-heavy indices in South Korea led the downturn, while oil prices held near recent highs.
Asian stock markets experienced a broad downturn on Friday, as contagion from a significant sell-off in the US semiconductor sector weighed on regional equities. This decline was particularly pronounced in South Korea, a hub for chip manufacturing, where the tech-focused KOSDAQ index plunged by 3.5% and the broader Kospi composite index retreated by 2.2%. Other major markets also succumbed to the pressure, with Japan's Nikkei 225 falling 1.4% and China's Shanghai Composite slipping 1.3%. Hong Kong's Hang Seng index bucked the trend, managing a slight gain of 0.25% amid the regional weakness.
The catalyst for the Asian market's decline was a severe rout in US technology stocks the previous day. Wall Street's Philadelphia semiconductor index registered its largest daily percentage drop since June, plummeting 6.7%. The broader Nasdaq composite also suffered, falling over 2.5%, partly fueled by disappointing earnings reports and renewed concerns about the substantial investment required for artificial intelligence (AI) initiatives, exemplified by Meta's forward-looking spending plans. These factors collectively stoked investor apprehension regarding future returns in the tech sector.
In commodity markets, oil prices maintained their elevated levels during Asian trading hours, holding near multi-month highs. Brent crude had closed the previous session around $113 a barrel, its highest point since early May. This price strength was attributed to geopolitical tensions, including reports of potential renewed strike plans against Iran following the US midterm elections. Additionally, ongoing supply-side concerns, such as US efforts to boost domestic fuel production via the Defense Production Act and reports of Russia deliberately constraining fuel exports, contributed to the tight market conditions.
Precious metals saw mixed movements, with gold dipping below $4,000 an ounce for the first time since July, although it stabilized during Asian trading. This downward pressure on gold was linked to a combination of factors, including elevated bond yields, a strong US dollar, and expectations of further monetary tightening by the Federal Reserve, partly driven by persistently high oil prices. Despite falling significantly from its January peak, gold continues to find underlying support from consistent central bank purchases and its role as a diversification asset for investors.
The currency markets remained largely range-bound for major pairs, though the Japanese yen saw a modest strengthening following the release of domestic inflation data. Japan's core consumer inflation rate rose to 2.1% year-on-year in September, exceeding forecasts and marking the first time above the Bank of Japan's (BoJ) 2% target in nine months. A closely watched core measure, excluding fresh food and energy, also accelerated, underscoring broadening price pressures despite government subsidies. This inflation uptick raises expectations for potential future policy adjustments from the BoJ, although immediate rate hikes are not anticipated.
Looking ahead, traders will be closely monitoring the ongoing developments in the semiconductor industry, particularly the impact of the US sell-off on Asian chipmakers and related technology firms. Investor sentiment towards AI investment and the profitability of related companies will be a key focus. Furthermore, geopolitical developments impacting oil prices and the persistent inflation data from major economies, especially Japan's potential policy shifts, will remain critical factors influencing global market direction. The performance of Western Digital and SK Hynix's strategic decisions regarding their US listings also provide insights into the current investment climate for tech hardware.
Source: InvestingLive. Summarized and rewritten by the Vexoda Newsroom. This is market news, not financial advice.