SYDNEY (July 2): Asian shares extended declines on Thursday as investors rotated out of chipmakers after a stellar quarter, while currency and bond markets braced for US jobs data that could give pointers to the risk of interest rate hikes.
Oil prices hit new four-month lows, with Brent crude down 1% at US$70.88 a barrel, as US President Donald Trump said talks with Iran had gone well in Qatar, and more oil tankers transited through the Strait of Hormuz.
European shares are expected to open steady, with regional stock futures little changed.
Wall Street futures edged up 0.2% after a sell-off in semiconductor shares overnight, though Meta Platforms jumped nearly 9% on reports it was building a cloud business to sell excess artificial intelligence (AI) computing capacity.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.2%, while Japan’s Nikkei dropped 1.4%. Hong Kong's Hang Seng index bucked the trend, with a gain of 0.9%.
South Korea’s Kospi sank 4.8%, extending Wednesday's slide of 2%, after an eye-watering second-quarter surge of 68% on soaring AI-related demand for memory chips. SK Hynix plunged 8.5% and Samsung tumbled 7.2%.
"The plunge in Asia semis today is more about a hangover from Wall Street," said Fabien Yip, a market analyst at IG, adding that profit-taking appeared to be key driver.
"Layered on top is Apple's reported outreach to restricted Chinese memory makers for China-market devices, which introduces pricing threat to the Korean and Japanese incumbents."
Investor attention is squarely on US non-farm payrolls data due on Thursday this month due to a holiday on Friday for Independence Day, which falls on a Saturday this year.
Economists polled by Reuters expect a rise of 110,000 jobs for June, but forecasts range widely from gains of 25,000 to 200,000, suggesting high chances of a surprise. The jobless rate is forecast to stay steady at 4.3%.
"Ideally, equity players want a Goldilocks outcome: respectable job creation, a stable unemployment rate," said Chris Weston, head of research at Pepperstone.
"Anything that avoids a marked increase in the implied probability of near-term rate hikes is likely to be welcomed by equity bulls."
At the Sintra Forum, Federal Reserve Chair Kevin Warsh said inflation risks had eased recently, offering only short-lived relief to Treasuries.
Warsh also said he would stick firmly to the 2% inflation target and "disappoint" anyone who expected loose monetary policy. Markets currently price in about 80% odds of a rate hike in September.
Treasury yields have been climbing as traders braced for a potentially strong jobs number, which could see bets for a near-term rate hike ramp up.
US two-year yields rose two basis points (bps) on Thursday to 4.1806%, and were up nine bps so far this week. 10-year yields also climbed two bps to 4.4911% and were up 12 bps this week.
Higher Treasury yields kept the US dollar supported.
The euro was steady at US$1.1385, having eased 0.4% overnight after European Central Bank President Christine Lagarde said inflation and growth risks were becoming more broadly balanced.
The dollar slipped 0.1% to ¥162.39, having hit a fresh 40-year high of 162.84 on Wednesday.
The yen's slide has drawn the usual warnings of intervention from Tokyo, although the impact of interventions in April and May proved short-lived, despite authorities expenditure of almost ¥12 trillion (RM300 billion).
Gold bounced 0.7% to US$4,059 an ounce after a drop of 14% in the second quarter.
