Asia report: Markets fall on fresh US economic jitters

4th Sep 2024 10:17

(Sharecast News) - Asia-Pacific markets fell sharply on Wednesday, driven by Japan's worst single-day drop since early August amid growing recession fears following a sell-off in US tech stocks overnight, as well as weak US economic data.

Losses spread across the region, although the magnitude of declines varied.

"Global growth fears are undoubtedly gaining steam, and we expect this could extend G10 FX and equity performance patterns - at least until the FOMC meeting on 28 September," said SPI Asset Management managing partner Stephen Innes.

"The weak ISM Manufacturing report sent ripples through the US equity markets, with tech stocks leading downward charges.

"When risk reduction takes hold, the most crowded trades tend to bear the brunt, and that's precisely what we saw in Nvidia, which tumbled 9.5% as global growth jitters intensified with some US Department of Justice antitrust concerns thrown in for good measure."

Innes added that every piece of economic data between now and 18 September would be scrutinised and traded as a clue for whether the FOMC will opt for a 25 or 50 basis point rate cut.

"Today's JOLTS report, while often overshadowed, could prove critical in shaping expectations for Friday's jobs data and beyond.

"With the bar set sky-high, even the slightest data miss will be magnified, turning lousy news into horrible news again."

Most markets follow Wall Street lower, Japan leads declines

In Japan, the Nikkei 225 dropped 4.24% to 37,047.61, while the Topix index shed 3.65%, closing at 2,633.49.

Tech stocks were hit particularly hard on Tokyo's benchmark, with Furukawa Electric plunging 9.19%, Dainippon Screen Manufacturing down 8.92%, and Tokyo Electron falling 8.55%.

In South Korea, the Kospi fell 3.15% to 2,580.80.

Key semiconductor firms saw steep losses, with SK Square tumbling 8.88%, SK Hynix losing 8.02%, and Hanmi Semiconductor dropping 7%.

Australian markets also faced significant declines, as the S&P/ASX 200 fell 1.88% to 7,950.50, led by heavy losses in the mining sector.

De Grey Mining dropped 8.71%, Fortescue fell 8.48%, and Gold Road Resources declined 7.65%.

Hong Kong's Hang Seng Index fell 1.1% to 17,457.34, with energy and mining firms taking the brunt of the losses.

CNOOC was down 6.35%, while Zijin Mining Group and PetroChina fell 6.15% and 6.06%, respectively.

Mainland China experienced smaller declines - the Shanghai Composite fell 0.67% to 2,784.28, and the Shenzhen Component dropped 0.51% to 8,226.24.

However, Triumph Science & Technology and Yijiahe Technology both saw significant declines, down 7.85% and 6.59%, respectively.

New Zealand's S&P/NZX 50 was a rare bright spot, rising 0.15% to 12,553.35.

Leading the gains in Wellington were Restaurant Brands New Zealand, up 3.35%, Argosy Property, which rose 1.7%, and Fisher & Paykel Healthcare, gaining 1.49%.

In currency markets, the dollar was weaker on the yen, slipping 0.2% to last trade at JPY 145.19.

The greenback was, however, stronger against its antipodean counterparts, rising 0.03% on the Aussie to AUD 1.4904, and advancing 0.05% against the Kiwi to NZD 1.6170.

Oil prices edged lower, with Brent crude futures down 0.26% on ICE at $73.56 per barrel, and the NYMEX quote for West Texas Intermediate slipping 0.37% to $70.08.

China services sector grows at a slower pace, semiconductor sector tumbles stateside

In economic news, China's services sector grew at a slower pace in August, according to the Caixin services purchasing managers index (PMI), which fell to 51.6 from 52.1 in July.

While the reading remained above the 50 mark, signalling expansion, the slower growth highlighted challenges in sustaining momentum in the post-pandemic recovery.

In the US overnight, semiconductor stocks took a significant hit, led by Nvidia, which saw a 9% drop in regular trading.

The decline dragged down other major chipmakers, including Intel, AMD, and Marvell, while the VanEck Semiconductor ETF (SMH), which tracks semiconductor companies, fell 7.5%, marking its worst performance since March 2020.

On the US data front, the Institute for Supply Management (ISM) manufacturing index for August registered at 47.2, reflecting a continued contraction in the American manufacturing sector.

Although the figure was slightly higher than July's 46.8, it missed market expectations of 47.9, further emphasising the ongoing challenges in manufacturing.

A reading below 50 signals contraction in the sector.

Reporting by Josh White for Sharecast.com.