(July 3): Stocks rebounded after two days of tech-led losses in the US that were fuelled by concerns that the artificial intelligence (AI)-driven rally had run ahead of itself. Gold extended gains as traders trimmed bets on Federal Reserve (Fed) interest rate hikes.
The MSCI Asia Pacific Index climbed 1.1%, with more than two shares rising for every one that declined in the gauge. All 11 subgroups of the benchmark advanced. Futures contracts tied to the tech-heavy Nasdaq 100 Index rose 0.6%. Stocks in mainland China, Hong Kong and Japan all gained in a broad rally that helped regional shares turn positive for the week.
South Korea’s Kospi index, the world’s best-performing major equity benchmark this year, climbed 3% after a volatile start that saw it drop to near a technical bear market. Shares of Samsung Electronics Co climbed 6.8% following a report that Anthropic PBC is in talks with the Korean company to manufacture a custom AI chip.
Treasury futures edged higher in Asia after weaker-than-expected US June employment data and lower oil prices challenged expectations for Fed rate hikes. There’s no cash trading in Treasuries worldwide on Friday due to a US holiday. The dollar weakened against most of its major peers.
Friday’s equity gains offered some relief after a sell-off in tech stocks, particularly chipmakers, fuelled concerns that the AI-driven rally may have gone too far, too fast. Even so, confidence in the technology’s long-term potential remains strong, with investors focused on whether earnings growth can justify lofty valuations and the billions of dollars being invested in AI infrastructure.
“We think the fundamentals are still very, very strong and the market is still underpricing them,” said Tim Moe, Goldman Sachs Group Inc chief Asia Pacific regional equity strategist, on Bloomberg Television. “There still is a lot longer to go in the overall positive profit environment for memory stocks and the AI hardware supply chain space overall.”
See also: Expecting US markets to rise unabatedly may be Mission: Impossible
The rebound in Asia came after semiconductor stocks in the US started the third quarter with their biggest two-day sell-off in nearly a month.
The Philadelphia Semiconductor Index, which gained a record 88% last quarter, fell 5% on Thursday. That brought its two-session decline to 12%, the most since June 5.
“The ride will be more turbulent from this point on,” said Fiona Yang, Asia Ex-Japan equities fund manager at Invesco. “The first half is more momentum driven. The AI tide pretty much lifted all boats. The second half for stock pickers like myself is really about who is going to maintain that level of profitability as capacity expands and maybe there will be demand volatility.”
See also: Asian stocks fall on Korean chip sell-off, oil dips
Elsewhere, gold rose for a third day as the weak US jobs numbers eased Fed rate-hike bets. The non-yielding metal, which is less attractive when rates are increased, gained as much as 1.8% to US$4,195.39 an ounce.
Silver climbed 2.2% to US$62.25 an ounce. Platinum and palladium also advanced.
Brent crude steadied in thin trading as tanker traffic through the Strait of Hormuz increased, adding to a gush of near-term supply while talks between the US and Iran continue. The commodity traded near US$72 a barrel.
Earlier, data showed the US labour market cooled in June, reinforcing expectations the Fed can afford to be patient on interest rates.
Nonfarm payrolls increased 57,000 last month after downward revisions to the prior two months took some of the shine off recent blockbuster reports, Bureau of Labor Statistics data Thursday showed. The unemployment rate fell to 4.2% as labour force participation plunged.
Traders pared back expectations for additional Fed rate hikes, though they continued to price in at least one increase this year.
“The jobs report proved to be a case of ‘bad news is good news’,” Kyle Rodda, senior analyst at Capital.com, wrote in a note.
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Corporate highlights:
- Tesla Inc’s vehicle sales beat Wall Street’s modest expectations by a wide margin.
- SoftBank Group Corp and its telecom unit will start renting AI computing resources to US companies next fiscal year.
- Rivian Automotive Inc raised its full-year sales outlook in a promising sign as the maker of electric vehicles begins deliveries of its lower-cost SUV seen as critical to the company’s future.
- Adani Enterprises Ltd is seeking to raise as much as 100 billion rupees (US$1 billion or $1.35 billion) through a sale of shares to institutional investors, terms showed.
- Shares of Tesla’s Chinese suppliers advanced after the company’s China deliveries climbed 24% year-on-year in June.
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.3% as of 12.58pm Tokyo time
- Japan’s Topix rose 1%
- Australia’s S&P/ASX 200 rose 1.4%
- Hong Kong’s Hang Seng rose 1.5%
- The Shanghai Composite rose 0.7%
- Euro Stoxx 50 futures rose 0.4%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at US$1.1441
- The Japanese yen was little changed at 161.17 per dollar
- The offshore yuan was little changed at 6.7851 per dollar
Cryptocurrencies
- Bitcoin fell 0.3% to US$61,357.93
- Ether was little changed at US$1,704.95
Bonds
- Australia’s 10-year yield declined two basis points to 4.80%
Commodities
- West Texas Intermediate crude rose 0.5% to US$69.02 a barrel
- Spot gold rose 1.3% to US$4,175.87 an ounce
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