Rolling coverage of the latest economic and financial news
3m agoJapanese stock market 'on course for worst day since March'
9m agoIntroduction: Global tech stocks fall as chip sell-off deepens
Jim Reid at Deutsche Bank says that the Japanese Nikkei index is now on course for its worst day in more than three months.
The Nikkei is currently likely on course for its worst day since March, and also leaves the index on track for technical correction territory, having now shed over 12% since its peak less than a month ago. There wasn’t a single catalyst behind the selloff, but we had TSMC’s earnings shortly after we went to press yesterday, and their share price is down -5.26% this morning after they said that capital expenditure would be higher than previously forecast. Meanwhile, Netflix’s earnings disappointed after the close last night, pushing their shares almost -9% lower in after-hours trading. And in the background, fears about rate hikes and more persistent inflation are still there, with Brent crude oil up another +1.06% this morning to $85.12/bbl. That would be its first close above $85/bbl in over a month, and that combination of concerns around tech and inflation has really put a dent in the more buoyant narrative after the soft US CPI report earlier this week. Before the slump accelerated overnight, US equities had already seen a rough session yesterday thanks to the fresh slide in chip stocks. In fact, the Philly semiconductor index (-4.29%) hit an 8-week low, having now shed -18.91% from its peak less than a month ago. So that now leaves it close to the -20% mark that would mark a technical start of a bear market, which is a big turnaround from Q2, when it posted its best quarterly performance since the index began in the early 1990s.
The Nikkei is currently likely on course for its worst day since March, and also leaves the index on track for technical correction territory, having now shed over 12% since its peak less than a month ago.
There wasn’t a single catalyst behind the selloff, but we had TSMC’s earnings shortly after we went to press yesterday, and their share price is down -5.26% this morning after they said that capital expenditure would be higher than previously forecast.
Meanwhile, Netflix’s earnings disappointed after the close last night, pushing their shares almost -9% lower in after-hours trading. And in the background, fears about rate hikes and more persistent inflation are still there, with Brent crude oil up another +1.06% this morning to $85.12/bbl. That would be its first close above $85/bbl in over a month, and that combination of concerns around tech and inflation has really put a dent in the more buoyant narrative after the soft US CPI report earlier this week.
Before the slump accelerated overnight, US equities had already seen a rough session yesterday thanks to the fresh slide in chip stocks. In fact, the Philly semiconductor index (-4.29%) hit an 8-week low, having now shed -18.91% from its peak less than a month ago. So that now leaves it close to the -20% mark that would mark a technical start of a bear market, which is a big turnaround from Q2, when it posted its best quarterly performance since the index began in the early 1990s.
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
It’s been a brutal 24 hours for some of the world’s biggest tech stocks, with markets in Asia falling today as a sell-off in US chip and memory stocks spread overnight.
Japan’s Nikkei 225 index dropped almost 5%, with the Japanese chipmaker Kioxia slumping 16%. The Chinese SSE Composite is down 3.3%. Markets in South Korea, which have been extremely sensitive to the chip sell off, are closed today.
It follows steep falls in memory and computer storage makers in the US yesterday, with Sandisk, Western Digital and Seagate all down more than 9%. Chip companies Intel and Micron both fell by about 6%.
The sell-off comes as investors grow increasingly nervous about whether the AI-driven rally in the market this year is sustainable.
Mohit Kumar, of the broker Jefferies, says the dominating theme in markets has been weakness in chip and tech stocks after chip manufacturer TSMC reported “underwhelming” results and guidance.
TSMC’s focus on increased capex raised market concerns around valuations and the returns on capex. The sector has been under pressure with position unwinds as it was one of the most crowded sectors in the market in June. In our view, the market moves have been driven by high expectations and position unwinds rather than underwhelming earnings. Our positioning indices suggest that semis was one of the most crowded trades in June, with positioning of over +6.5 in the third week of June. Sharp unwinds have seen that positioning drop to +1.3 (on a scale of -10 to +10) as of yesterday close.
TSMC’s focus on increased capex raised market concerns around valuations and the returns on capex. The sector has been under pressure with position unwinds as it was one of the most crowded sectors in the market in June.
In our view, the market moves have been driven by high expectations and position unwinds rather than underwhelming earnings. Our positioning indices suggest that semis was one of the most crowded trades in June, with positioning of over +6.5 in the third week of June. Sharp unwinds have seen that positioning drop to +1.3 (on a scale of -10 to +10) as of yesterday close.
Elsewhere this morning, FTSE 100 fashion brand Burberry has said its retail sales rose 5% in the first quarter, led by strength in its markets in America and Greater China – and its gen Z shoppers are up by a “double digit” percentage.
Chief executive Joshua Schulman adds that for the first time in three years, the company has reported growth across all of its product categories: womenswear, menswear, accessories and children. He says:
Our strategy is working . We are attracting a broad range of luxury customers across product categories, channels and geographies , reinforcing my confidence in the opportunities ahead.
The agenda
Today: Andy Burnham to be named Labour leader
7am BST: Burberry Q1 update
9am BST: EU current account figures for May
10am BST: EU harmonised CPI inflation figures for June
11am BST: United Utilities AGM
1.30pm BST: US housing starts and building permits for June
