Asian equities slid on Thursday, led by chip stocks as investors fret over the prospect of escalating trade tensions between the U.S. and China, while the yen was firm after scaling a six-week high following suspected interventions by Tokyo.
The U.S. dollar loitered closed to its weakest in four months against a basket of currencies as comments from Federal Reserve officials bolstered the case for a cut in September, keeping gold near record highs.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab fell 0.63%, with a sub-index of IT stocks (.MIAPJIT00NUS), opens new tab down 2.5%. Tech-heavy South Korean shares (.KS11), opens new tab fell 1.5%, while Taiwan stocks (.TWII), opens new tab were down 2%.
The yen’s strength and the sharp drop in chip stocks took Japan’s Nikkei (.N225), opens new tab down more than 2%.
A report that the United States was considering tighter curbs on exports of advanced semiconductor technology to China triggered a sharp sell-off in chip stocks, with the Nasdaq (.IXIC), opens new tab tumbling overnight.
“I think this volatility spike is now leading to some broader risk reduction as investors worry about stretched positioning,” said Ben Bennett, Asia-Pacific investment strategist at Legal and General Investment Management.
The European bourses were due for a mixed open, with Eurostoxx 50 futures 0.14% lower while German DAX futures were little changed and FTSE futures edged up 0.5%.
Investor attention will be on the policy decision from the European Central Bank later in the day, where the central bank is expected to stand pat, although comments from officials will be crucial in gauging when the next rate cut will come.
Broader risk sentiment also took a hit after Republican presidential candidate Donald Trump said on Wednesday Taiwan “did take about 100% of our chip business” and should pay the U.S. for its defence as it does not give the country anything.
China stocks wavered as investors awaited policy news from a key leadership gathering in Beijing. The Shanghai Composite index (.SSEC), opens new tab was down 0.12% and the blue-chip CSI300 index (.CSI300), opens new tab up 0.12%.
