Asian stocks took a dive on Thursday, with Japan’s Nikkei posting its biggest daily decline in three years, as tech stocks dragged bourses downward in the wake of tame earnings reports from some of Big Tech’s biggest players.
The Nasdaq lost almost 4% – its worst one-day fall since 2022 – as lacklustre Alphabet and Tesla earnings undermined investor confidence in the already lofty valuations of the “Magnificent Seven” stocks.
That, along with China’s central bank springing a surprise with a cut in longer-term interest rates, sent investors fleeing into less risky assets, including short-dated bonds, the yen and Swiss franc.
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Japan’s Nikkei share average ended at a three-month low as the yen’s gain against major currencies hurt investor sentiment.
The Nikkei fell 3.28% to end at 37,869.51, its lowest close since April 25. The index extended its losing streak to seven sessions, the longest losing run since October 2021 and posted its biggest daily fall since June 2021. The broader Topix slipped 2.98% to 2,709.86.
The yen rose to its strongest level against the dollar in two-and-a-half months and scaled multi-month highs against other currencies ahead of next week’s Bank of Japan (BOJ) meeting.
A stronger yen tends to hurt exporter shares as it decreases the value of overseas profits in yen terms when firms repatriate them to Japan.
Technology investor SoftBank Group tanked 9.39% to drag the Nikkei the most. Chip-related shares tracked their US peers, with Tokyo Electron and Advantest declining 4.82% and 6.04%, respectively.
Nissan Motor fell 6.98% as the automaker saw first-quarter profit almost completely wiped out and slashed its annual outlook.
China stocks fell as well, tracking weakness in global markets, with investors worrying about the country’s economic woes after the central bank’s rates lowering move.
China Rates Surprise
China’s central bank surprised markets for a second time this week by conducting an unscheduled lending operation on Thursday at steeply lower rates, suggesting authorities are trying to provide heavier monetary stimulus to prop up the economy.
The medium-term lending facility operation comes after the central bank cut several benchmark lending rates on Monday.
The Shanghai Composite Index fell 0.52%, or 15.21 points, to 2,886.74, while the Shenzhen Composite Index on China’s second exchange edged up 0.07%, or 1.12 points, to 1,547.41.
The blue-chip CSI 300 index fell 0.55% as, earlier in the session, financials, consumer staples and healthcare fell between 0.03% and 0.73%. The real estate index rose 0.92%.
Chinese H-shares listed in Hong Kong – stocks belonging to companies from the Chinese mainland – fell 1.73% to 6,036.17, while the Hang Seng Index was down 1.77%, or 306.08 points, to 17,004.97.
Elsewhere across the region, in earlier trade, Sydney, Seoul, Singapore, Wellington, Mumbai, Bangkok, Manila and Jakarta were also well in the red. MSCI’s broadest index of Asia-Pacific shares outside Japan lost 1%.
European markets were set for a lower open, with Eurostoxx 50 futures down 0.6% while FTSE futures slipped 0.2%. Nasdaq futures, however, rebounded 0.3% and S&P 500 stock futures rose 0.2%.
US GDP Data Wait
The sell-off in stocks saw investors ramp up bets on rate cuts globally, with futures implying a 100% chance of a Federal Reserve easing in September. A spike in market volatility fuelled a vicious squeeze on carry trades which saw the US dollar sink another 0.7% to 152.78 yen.
Short-dated bonds rallied, supported by comments from former New York Fed president Dudley that the central bank should cut rates, preferably at its policy meeting next week.
The yield on two-year Treasuries fell another 3 basis points to 4.3894%, having dropped 4 bps overnight. Ten-year yields also eased 2 bps to 4.2622% on Thursday.
Advance US gross domestic product data is due later on Thursday and is forecast to show growth picking up to an annualised 2% in the second quarter. The closely watched Atlanta Fed GDPNow indicator points to growth of 2.6%, indicating some risk to the upside.
In commodity markets, iron ore prices fell almost 1% as China concerns weighed, while oil prices were pinned near six-week lows.
Key figures
Tokyo – Nikkei 225 < DOWN 3.28% at 37,869.51 (close)
Hong Kong – Hang Seng Index < DOWN 1.77% at 17,004.97 (close)
Shanghai – Composite < DOWN 0.52% at 2,886.74 (close)
London – FTSE 100 < DOWN 0.96% at 8,075.10 (0933 BST)
New York – Dow < DOWN 1.25% at 39,853.87 (Wednesday close)
- Reuters with additional editing by Sean O’Meara
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