Hang Seng Index, Nikkei Index, ASX 200: Yen Gains and Tech Rout Trigger Sharp Losses

US Markets: Tech Sector Sell-Off Accelerates

On Wednesday, July 24, the US equity markets suffered heavy losses as the tech sector unwind intensified. The Nasdaq Composite Index tumbled 3.64%, while the Dow and the S&P 500 slid by 1.25% and 2.31%, respectively.

Alphabet Inc. (GOOGL) and Tesla Inc. (TSLA) reported their earnings results after the closing bell on Tuesday. On Wednesday, investors reacted to the results that fell short of market expectations. Tesla and Alphabet saw losses of 12.33% and 5.03%, respectively.

Market reaction to the earnings results overshadowed better-than-expected US service sector data.

Economic Indicators: Signs of US Economic Stability Amid Market Volatility

The S&P Global Services PMI rose from 55.3 in June to 56.0 in July. Prices charged for goods and services increased at the slowest pace since January while firms continued to hire. The data eased immediate fears of a hard US landing while supporting bets on a September Fed rate cut.

S&P Global Market Intelligence Chief Business Economist Chris Williamson commented,

“The flash PMI data signal a ‘Goldilocks’ scenario at the start of the third quarter, with the economy growing at a robust pace while inflation moderates.”

China Economic Stress: Impact on Global Sentiment

On Thursday, investor jitters about the Chinese economy continued to impact market risk sentiment. Hopes of meaningful fiscal policy measures from Beijing to bolster the Chinese economy have faded.

Since the Communist Party’s Third Plenum, the People’s Bank of China has cut loan prime rates and the Reserve Requirement Ratio. The measures to boost demand failed to impress the markets. A lack of a meaningful fiscal stimulus package may raise doubts about China meeting its 5% growth forecast for 2024.

In Q2 2024, the Chinese economy expanded by 4.7%, following growth of 5.3% in Q1 2024.

Expert Views on China and the Third Plenum

Natixis Asia Pacific Chief Economist Alicia Garcia Herrero commented on the Third Plenum and China, stating,

“The Third Plenum has clearly not been a game changer in terms of reforms announced. It seems as if the Chinese authorities prefer to muddle through while doubling down on their convictions. The problem is that there by now much more mud to deal with.”

Failure to bolster the Chinese economy could deliver more pain for the HK and Mainland equity markets. China must also contend with trade tariffs and a possible trade war with the US.

Hang Seng Index and Mainland China Equities Fall

Meanwhile, the Hang Seng Index declined by 1.09% on Thursday morning. Tech stocks dragged the Index into negative territory.

The Hang Seng Tech (HSTECH) Index slid by 1.48% on Thursday. Tencent (0700) tumbled by 3.17%, while Baidu (9888) declined by 1.54%.

Mainland China equity markets extended their losses from Wednesday.

The Shanghai SE Composite Index and CSI 300 declined by 0.24% and 0.25%, respectively.

Nikkei Index Slides as USD/JPY Drops Below 153

The Nikkei Index tumbled by 2.76% on Thursday. A weaker USD/JPY and the tech sector rout impacted Nikkei-listed stocks. On Thursday, the USD/JPY was down 0.66% to 152.840, extending its losses from Wednesday (-1.11%).

Softbank Group Corp. (9984) tumbled 7.34%, while Tokyo Electron Ltd. (8035) and Sony Group Corp. (6758) slid by 4.61% and 4.37%, respectively.

Nissan Motor Corp. (7201) was down 2.01%, also showing the effects of a stronger Yen on export stocks.

ASX 200 Tracks the Dow into the Red

The ASX 200 Index was down 1.17% on Thursday morning, tracking the US equity markets into negative territory. Tech stocks led the ASX 200 down, with the S&P ASX All Technology Index (XTX) sliding by 2.14%. Bank, gold, and mining also contributed to the losses.

Fortescue Metal Group (FMG) was down 3.71% as iron ore spot prices fell for the fifth session on Thursday. Gold stock Northern Star Resources Ltd. (NST) declined by 0.91%, with gold spot down 1.01% on Thursday. Commonwealth Bank of Australia (CBA) fell by 1.13%.

Investors should remain alert with US politics and private sector PMIs in focus. Closely monitor the news wires, real-time data, and expert commentary to manage trading strategies accordingly. Stay informed with our latest news and analysis to manage positions across the Asian equity markets.