(Bloomberg) — Asian stocks fell the most since Aug. 5, tracking a selloff in their U.S. counterparts driven by a sharp drop in Nvidia Corp.
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Shares of Asian chipmakers fell amid renewed concerns about the AI craze, dragging the regional stock index down more than 2%. Chip giants Taiwan Semiconductor Manufacturing Co. and SK Hynix Inc. each fell at least 4%. U.S. futures also fell in Asian trading after the S&P 500 lost more than 2%.
The broad risk aversion came as a closely watched U.S. manufacturing gauge again missed expectations, shifting investors’ focus to the prospects of a slowdown in the world’s largest economy. That added to already weak sentiment in Asia, where a string of disappointing Chinese data has hurt riskier assets.
“The August 5th move probably burned more than a few people and it’s hard to get over those memories especially as the confusion between hard landing and soft landing is still unsettled,” said Charu Chanana, head of FX strategy at Saxo Markets in Singapore. “I would be a bit cautious here,” she added, as weak data will stoke recession fears while positive data will dampen expectations of rate cuts.
Treasury yields steadied after falling on Tuesday. The dollar index snapped a five-day winning streak, its longest since April. The yen edged up slightly. Oil prices fell after falling about 5% on Tuesday amid weak demand and concerns about oversupply.
Elsewhere in Asia, the Australian dollar held on to losses after data showed Australia’s economic weakness continued in the three months to June.
Chinese stocks fell after a private survey showed services activity expanded less than expected, in the latest sign of economic fragility.
The S&P 500 and Nasdaq 100 had their worst starts to September since 2015 and 2002, respectively. With inflation expectations stabilizing, attention has shifted to the health of the economy, where signs of weakness could prompt faster monetary easing. While interest rate cuts tend to be a good omen for stocks, that’s not usually the case when the Fed is rushing to prevent a recession.
Wall Street’s fear index – the VIX – rose sharply.
“The heavy sell-off on Wall Street was a stark reminder that September has a bad reputation for risk appetite,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore, adding that the situation could be exacerbated by the risk of a U.S. recession and the unraveling of the yen carry trade.
Traders expect the Federal Reserve to cut interest rates by more than two full percentage points over the next 12 months — the biggest drop outside a downturn since the 1980s.
At the start of a busy week of economic data, a report showed that U.S. manufacturing activity contracted for a fifth straight month in August. Focus will shift to the key U.S. jobs report due later this week. The data is expected to show the world’s largest economy added about 165,000 jobs, based on the median estimate in a Bloomberg survey of economists.
“This week’s jobs report, while not the only deciding factor, is likely to be a major factor in the Fed’s decision between cutting rates by 25 or 50 basis points,” said Jason Pride and Michael Reynolds of Glenmede. “Even modest signals in this week’s jobs report could be a key decision point in whether the Fed takes a more dovish or aggressive approach.”
The S&P 500 fell to about 5,530 points while the Nasdaq 100 lost more than 3% as Nvidia stock plunged 9.5% — wiping out $279 billion in a single day for a U.S. stock. The U.S. Justice Department has sent subpoenas to Nvidia and other companies as it seeks evidence that the chipmaker violated antitrust laws.
Main events this week:
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HCOB Euro Area PMI and PPI services, Wednesday
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Canada Interest Rate Decision, Wednesday
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US Job Opportunities, Factory Orders, Beige Book, Wednesday
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Eurozone Retail Sales, Thursday
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US Initial Jobless Claims, ADP Employment, ISM Services Index, Thursday
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Eurozone GDP, Friday
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US Non-Farm Payrolls, Friday
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Federal Reserve Board Member John Williams Speaks Friday
Some key movements in the markets:
Stocks
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S&P 500 futures were down 0.4% as of 11:12 a.m. in Tokyo.
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Japan’s Topix index fell 3%
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Australia’s S&P/ASX 200 index fell 1.8%.
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Hong Kong’s Hang Seng Index fell 1.7%.
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The Shanghai Composite Index fell 0.7%.
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Euro Stoxx 50 futures fell 0.9%
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Nasdaq 100 futures fell 0.6%.
Currencies
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The Bloomberg Dollar Index fell 0.1%.
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The euro was little changed at $1.1053.
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The Japanese yen rose 0.1% to 145.27 yen per dollar.
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The offshore yuan rose 0.1% to 7.1134 against the dollar.
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The Australian dollar fell 0.2% to $0.6698.
Cryptocurrencies
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Bitcoin fell 2.7% to $56,669.73
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Ether price fell 4% to $2,365.42
Bonds
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The yield on the 10-year US Treasury note was little changed at 3.83%.
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The yield on the 10-year Japanese bond fell 3.5 basis points to 0.885%.
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The yield on the 10-year Australian bond fell six basis points to 3.94%.
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This story was produced with the help of Bloomberg Automation.
–With assistance from Rob Verdonk and Joanna Ussinger.
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