Hong Kong (AFP) – Technology stocks were back in the crosshairs of investors Wednesday, taking another heavy blow from a spike in bond yields, rising oil prices, persistent inflation, and dimming hopes for a deal to reopen the Strait of Hormuz. The selloff tracked losses on Wall Street, where firms heavily invested in artificial intelligence and chips were sharply lower, staunching a recent recovery in the sector in recent weeks following a crushing July.
With the crisis in the Middle East showing few signs of ending — US and Iranian officials have dug in and appear prepared for an extended standoff — crude prices are pushing back higher as traders factor in the crucial strait staying closed. That has stoked inflation expectations and sent US government debt costs soaring. The yield on a 30-year US Treasury on Tuesday hit its highest level since June 2007, before the global financial crisis, while 10-year yields are higher than before the first US-Israel strikes on Iran in late February. Higher government borrowing and a flood of corporate issuance have added to the upward pressure.
National Australia Bank’s Rodrigo Catril said: “AI-linked stocks that have increased their borrowing levels are now seemingly showing a greater deal of sensitivity to the move up in higher longer-dated yields.” US tech and chip giants including Nvidia, Intel, Micron, and Broadcom took a battering, dragging the Nasdaq and S&P 500 lower. In Asia, Seoul’s Kospi, the poster child of the AI tech rally, lost 5.8 percent as chip titan SK hynix was clobbered 9.8 percent and Samsung nearly eight percent. After the market closed, SK hynix announced it would buy back $29 billion of its shares in a bid to settle investor nerves. Tokyo shed more than three percent, with Kioxia off 12.6 percent and investment giant SoftBank more than 10 percent off. Shanghai was also sharply lower, with Taipei, Sydney, Singapore, Manila, Mumbai, Bangkok, and Jakarta all dropping. Hong Kong, however, rose.
London was flat as data showed UK inflation jumped last month owing to rising oil prices, while Paris edged up and Frankfurt dipped. “Higher yields will increase borrowing costs for hyperscalers, raising questions about the outlook for capital spending and the potential impact on AI infrastructure companies,” said Kazunori Tatebe of Daiwa Asset Management. Both main crude contracts rose Wednesday, with Brent hovering around $92 a barrel and West Texas Intermediate above $85, as the chances of any Middle East deal thin after US President Donald Trump said he would not extend a 60-day truce. The president’s envoy and son-in-law Jared Kushner this week flagged “very positive and active conversations.” But Trump wrote on his Truth Social network: “There are no talks or conversations going on, or scheduled, with the Islamic Republic of Iran. The Naval Blockade remains in full force and effect.”
Analysts warned the prospect of a prolonged spike in crude was troubling traders. “With oil rising towards $90 a barrel, investors are increasingly concerned about the possibility of a more prolonged inflation shock,” said Fiona Cincotta, an analyst at Forex.com. The Fed has come under pressure to hike interest rates to combat inflation, which has held about the bank’s two percent target for five years. Analysts pointed to the gathering of central bankers and finance heads in Jackson Hole, Wyoming, later this month as a key event where Fed chief Kevin Warsh’s speech will be pored over for an idea about its plans. Minutes from the bank’s most recent policy meeting are due out later Wednesday and could give an idea about decision-makers’ thinking.
– Key figures at around 0810 GMT –
Tokyo – Nikkei 225: DOWN 3.2 percent at 65,326.42 (close)
Hong Kong – Hang Seng Index: UP 0.1 percent at 25,495.07 (close)
Shanghai – Composite: DOWN 2.4 percent at 3,894.42 (close)
London – FTSE 100: FLAT at 10,731.64
West Texas Intermediate: UP 0.4 percent at $85.24 per barrel
Brent North Sea Crude: UP 0.3 percent at $91.31 per barrel
Euro/dollar: UP at $1.1597 from $1.1577 on Tuesday
Pound/dollar: UP at $1.3555 from $1.3533
Dollar/yen: DOWN at 159.17 yen from 159.64 yen
Euro/pound: UP at 85.55 pence from 85.53 pence
New York – DOW: DOWN 0.2 percent at 53,343.40 (close)
© 2024 AFP
