An electronic stock board showing the Nikkei 225 Stock Average figure displayed inside the Kabuto One building in Tokyo, Japan, on Thursday, 1 June 2023. Shares in Hong Kong, South Korea, Australia, and Japan all advanced, with those in mainland China steady. While various US non-tech sectors advanced on Monday, Nvidia extended a three-day rout of about $430-billion — crossing the technical threshold of a correction. In Asia, investors were rotating out of the technology sector into other parts of the market with financial stocks leading gains in the MSCI AC Asia Pacific Index.
Among currencies, the yen strengthened, but still hovered not far from the weakest level in about 34 years. The top currency official had warned that authorities stood ready to intervene if necessary, while some traders see the potential for the yen to slump as far as 170 per dollar. The greenback dipped slightly as Treasuries steadied in Asian trading.
“As we approach the quarter-end, global investors are rebalancing their portfolio, selling assets that have performed well recently and buying names that have lagged,” said Hideyuki Ishiguro, chief strategist at Nomura Asset Management Co.
Traders will be watching for further signs of pressure on the world’s second-biggest economy. Data released Monday showed China’s fiscal revenue shrank at the fastest pace in more than a year, fueling expectations that the government could make another rare mid-year budget revision to aid a recovery.
President Xi Jinping called on China to step up its innovation, citing the dominance of other countries in certain key technologies in comments that underscore his nation’s escalating semiconductor confrontation with the US.
In other news, the US is investigating China Mobile, China Telecom and China Unicom over concerns the firms could exploit access to American data through their US cloud and internet businesses by providing it to Beijing, Reuters reports, citing three unidentified people familiar with the matter.
Downside risks
Following a tech-led rally, Deutsche Bank’s Binky Chadha said US equities are set to pause. There’s a lot of good news baked into markets, and if that optimism proves unjustified, there could be downside risks, Lori Calvasina at RBC Capital Markets noted. To John Stoltzfus at Oppenheimer, while the bull market appears sustainable, some profit-taking should be expected.
“A decline in the tech sector is certainly possible, even if the sector is going to do well during the summer months overall,” Matt Maley at Miller Tabak noted. “Even if you agree with the most-bullish scenario for the AI phenomenon for the second half of 2024, no group moves in a straight line.”
In commodities, oil held gains as investors weighed the potential fallout from rising geopolitical tensions. Gold was steady after closing higher in the previous session on a weaker US dollar, which boosted the appeal of commodities.
Bitcoin rebounded after plunging 6.6% on Monday. Losses are piling up in the crypto market after its second-worst weekly decline of 2024, a reflection of cooling demand for Bitcoin exchange-traded funds and uncertainty over monetary policy.