Stocks Selloff Extends on Tech, Oil Rises on Iran: Markets Wrap
(Bloomberg) — Stocks extended losses as a selloff in technology shares gathered pace and a robust US jobs data boosted bets on Federal Reserve interest-rate hikes. Oil rose and Treasuries fell as tensions flared in the Middle East.
MSCI’s Asian equity gauge slid as much as 4%, the biggest intraday decline since early March. South Korea’s Kospi index dropped 6% after an earlier slump of more than 8% saw trading temporarily halted. Shares also fell in Japan and Taiwan.
Brent crude climbed 3% to above $96 a barrel after Israel said it struck several military targets in Iran, retaliating against missile attacks by Tehran. Higher oil prices will add further pressure to inflation, and that coupled with strong US jobs data, helped boost bets for higher Fed interest rates.
The global slide in stocks and bonds is the biggest setback in months for the latest leg of the bull market, which began at the end of March when negotiations began in earnest to end the war in Iran. Amid concerns about inflation and elevated oil prices, investors have begun to question the sustainability of artificial intelligence-driven gains, raising doubts about whether the rally has run too far, too fast.
“Asian markets are tumbling today as Wall Street’s tech-led shockwave rolls through the region,” said Hebe Chen, an analyst at Vantage Global Prime. That’s “turning the AI trade from market darling into the market’s overnight pain point. This does not break the structural AI story, but it does mark an overdue reality check.”
On Friday, Wall Street’s historic weekly run came to a halt as a selloff in tech stocks gathered momentum. Stocks also faced rising risk with mega AI deals ready to flood markets.
The Nasdaq 100 Index sank 4.8% Friday, while growing anxiety about valuations sent the S&P 500 down 2.6%, with the gauge failing to complete a 10th straight week of gains. The Philadelphia Semiconductor Index slumped 10%.
Chipmakers were weak across Asia as well. Samsung Electronics Co. tumbled as much as 11%, SK Hynix Inc. lost 10% and Taiwan Semiconductor Manufacturing Co. slid 5.7%.
While Asia reacted to Friday’s selloff on Wall Street, sentiment toward US tech stocks steadied as Nasdaq 100 futures erased earlier losses to rise 0.3%.
Concerns about an AI bubble have also resurfaced, with several investors, including billionaire Ray Dalio, warning that the market is exhibiting characteristics of a boom that will eventually unravel.
“In the longer run, this will prove to be a technical correction, albeit a scary one in a longer-term bull market,” Goldman Sachs Group Inc. Chief Asia Pacific regional equity strategist Tim Moe said on Bloomberg TV. “The issue here is one that stocks have gone up a lot, there is lot of profit to be taken, there is clearly some signs that speculative activity increased, particularly for retail investors in Korea.”
What Bloomberg Strategists Say…
“With US inflation data due Wednesday, there’s plenty of potential for Treasury yields to climb further and send USD/JPY toward the 161.95 peak touched in July 2024 that was the weakest level for the yen since the 1980s. That puts the Japanese currency at the forefront of Asian peers being driven down by the impact of the Iran war.”
— Garfield Reynolds, MLIV Team Leader. Read more on MLIV.
The dollar, the haven of choice since the Middle East conflict began, gained against most of its Group-of-10 peers. Treasuries extended declines as traders boosted bets the Fed will hike rates. The Treasury 10-year yield climbed two basis points to 4.55%.
South Korea’s government laid out a series of measures to curb pressure on the won after the currency slid to its weakest level since 2009.
Iran fired several rounds of missiles toward Israel, as Trump pushed to preserve a faltering ceasefire in the US’s 100-day conflict with Tehran. The US and Iran appear to be making little progress toward an interim deal to end the war Washington and Israel began about 100 days ago.
Another factor for investors to consider was the solid US jobs report.
While there was a lot to like in Friday’s economic data, the figures came at a time when inflation risks are challenging the Fed. US job growth topped all forecasts in May and the unemployment rate held steady at 4.3%, offering the clearest sign yet that the labor market may be breaking out of a prolonged period of lackluster hiring.
Interest-rate swaps indicated traders expect a quarter-point Fed hike by the December policy meeting, with a roughly 60% chance of a move in October.
Attention now turns to Fed policymakers’ next meet June 16-17 under the leadership of new Chairman Kevin Warsh.
Corporate Highlights:
OpenAI is readying a major platform overhaul ahead of its highly anticipated IPO later this year to better compete with rivals such as Anthropic, the Financial Times reported. Nvidia Corp. Chief Executive Officer Jensen Huang said its new Vera central processing units will use SK Hynix Inc.’s memory chips as the two companies prepare to do more business in the coming year. A consortium of French telecommunications companies have agreed to buy billionaire Patrick Drahi’s SFR in a deal that values the country’s second-largest mobile carrier at €20.4 billion ($23.5 billion) including debt. Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 11:09 a.m. Tokyo time Nikkei 225 futures (OSE) fell 4.2% S&P/ASX 200 futures fell 1.4% Japan’s Topix fell 2.7% Hong Kong’s Hang Seng fell 1.3% The Shanghai Composite fell 1% Euro Stoxx 50 futures fell 1.1% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was unchanged at $1.1522 The Japanese yen was little changed at 160.35 per dollar The offshore yuan was little changed at 6.7863 per dollar Cryptocurrencies
Bitcoin rose 1.9% to $63,009.31 Ether rose 3.3% to $1,681.58 Bonds
The yield on 10-year Treasuries advanced three basis points to 4.56% Japan’s 10-year yield advanced four basis points to 2.705% Commodities
West Texas Intermediate crude rose 3.5% to $93.67 a barrel Spot gold fell 0.2% to $4,319.01 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Winnie Hsu and Abhishek Vishnoi.
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