Asian shares sell-off on Wall Street tech rout, oil slides
SYDNEY (Reuters) – Asian shares skidded on Tuesday, pressured by a tech rout on Wall Street and a slump in oil prices, while political risks in Europe buoyed the dollar as investors dumped riskier assets.
Fears of a likely peak in corporate earnings growth, softening global demand and faster rate hikes in the United States have put global investors on edge over the past month, prompting them to take money off the table before year end.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS dropped 1.4 percent to a 1-1/2 week low.
Japan’s Nikkei .N225 dived 3.2 percent, led by losses in electric machinery makers and suppliers of Apple’s (AAPL.O) iPhone parts after three suppliers issued warnings on results, sending tech-heavy Nasdaq .IXIC slumping over 2 percent.
The grim outlook triggered a steep selloff in Asian tech firms, with shares in Japan Display (6740.T) plummeting over 11 percent while Murata Manufacturing (6981.T) and TDK Corp (6762.T) dived as much as 8.9 percent and 8.4 percent respectively.
“Market participants are gradually thinking that this technology stocks boom is going to end before long,” said Yoshinori Shigemi, Japan-based global market strategist at JPMorgan Asset Management.
“Lower oil prices are another headwind for U.S. stock markets, specially the energy sector.”
“We are suggesting our clients to shift from any technology stocks to quality names, stocks with high return-on-equity and low leverage,” Shigemi said without naming any stocks.
South Korea’s KOSPI index .KS11 dropped 1.7 percent with Samsung Electronics (005930.KS) down 2.8 percent. Chinese shares were also in the red, with the blue-chip CSI 300 index .CSI300 off 0.6 percent.
The Asia ex-Japan index is now down nearly 17 percent this year, after a solid 33.5 percent gain in 2017, with October the worst month since mid-2015.
“The U.S tech sector… is generally expensive, over-owned and earnings momentum is not able to keep up with lofty expectations,” said Jordan Cvetanovski, portfolio manager at Pengana International Equities.
“In the case of Apple, we are now seeing evidence of a consumer that is saturated with their products and Apple’s inability to innovate sufficiently to attract new users is showing in the latest projections for…the iPhone,” he added.
Investor sentiment has also been dented by the deepening trade battle between the United States and China, with Asian emerging markets suffering their largest monthly foreign outflows last month since August 2011, according to Khoon Goh, Singapore-based head of Asia research for ANZ Banking Group.
Funds returned over the early part of November on hopes that U.S.-China tensions would ease, Goh added, with the focus on a meeting between U.S. President Donald Trump and his Chinese counterpart Xi Jinping later this month.
“The outcome of the meeting will have an important influence on portfolio flows in Asia into the end of the year,” Goh added.
Worryingly, the Trump administration is broadening its China trade battle beyond tariffs with a plan to use export controls, indictments and other tools to counter the theft of intellectual property, the Wall Street Journal reported citing sources.
Risk assets including Asian equities have also been hurt by rising U.S. interest rates. The Federal Reserve is expected to tighten policy further in December.
The Fed’s San Francisco President Mary Daly said on Monday the U.S. central bank should continue to raise rates gradually with her “modal” forecast showing two to three rate hikes over the next period of time.
In Europe, fears that Britain could crash out of the European Union without a Brexit deal and a growing rift over Italy’s budget hit the euro and the pound, pushing the dollar’s index .DXY to 97.693 against a basket of currencies, a level not seen since mid 2017. It was last at 97.581.
The euro EUR= was slightly firmer at $1.1233 after breaking below important chart support of $1.13.
The Italian government is facing a Tuesday deadline for it to submit a revised budget to the EU.
Sterling GBP= fell to $1.2825 as three straight sessions of losses took it to the lowest since Nov.1. There were still considerable unresolved issues with the EU over Brexit, British Prime Minister Theresa May said on Monday.
It was last up 0.1 percent at $1.286.
Oil prices hovered near multi-month lows after declining for a record 11th consecutive session amid softening demand and as Trump said he hoped there would be no oil output reductions.
U.S. crude CLc1 skidded 74 cents to $59.19 a barrel. Brent crude futures LCOc1 fell 61 cents to $69.51.
Spot gold XAU= was 0.2 percent firmer at $1,202.9 per ounce.