Moving markets today: Asian markets calm after Wall Street tech sell-off; Nvidia slides 6.68 per cent, Chinese yuan hits seven-month low, eyes on US house price data and Fedspeak
The Nasdaq Composite saw its largest drop in almost two months, primarily due to a sell-off led by Nvidia and other major tech stocks, which countered gains in the broader US stock market. Asian markets were subdued on Tuesday, and the yen reached a new low against the euro, although intervention efforts tempered its decline against the US dollar. Oil prices remained stable as concerns about China’s economic recovery overshadowed supply tensions from geopolitical conflicts. Gold prices dipped as investors awaited US inflation data. China’s yuan continued its decline to levels not seen in seven months, accompanied by renewed capital outflows. Japan reaffirmed its readiness to address excessive yen volatility, according to officials. Roaring Kitty faced losses on his GameStop holdings amid a slide in the company’s shares. Investors are focused on upcoming US housing indicators for April. The FTSE 100 closed higher on Monday, but futures suggested a weak start for Tuesday’s trading session. Here are five key takeaways for your day.
China’s yuan hits seven-month low as capital outflows surge
On Monday, China’s yuan dropped to its lowest point in seven months against the dollar, approaching the limit of its official policy band. This decline was influenced by the dollar’s overall strength and a weakening yen. The yuan hit 7.2624 per dollar, its lowest level since November, just one pip shy of the lower boundary set by the People’s Bank of China, before trading at 7.2618 per dollar, Reuters reported.
The yuan’s slide, coupled with significant capital outflows from mainland China to Hong Kong, signals that domestic investors are losing confidence in a quick recovery in their home markets and are seeking higher returns in nearby assets.
GameStop’s slide puts Roaring Kitty in the red
A recent dip in GameStop shares briefly pushed well-known meme stock trader Keith Gill, aka Roaring Kitty, into a loss on his investment in the struggling video game retailer. Last month, GameStop shares initially jumped when Gill rejoined social media discussions about the company after a three-year break, the FT reported.
However, on Monday, the shares dipped below the $23.4135 that Gill paid for his 2.1 per cent stake, according to a June 13 screenshot of his account. The shares eventually closed at $23.65, slightly above Gill’s purchase price but still about a third higher than before his social media return.
Japan to act on yen volatility, official says
Japanese Chief Cabinet Secretary Yoshimasa Hayashi addressed concerns about the yen’s recent drop towards the significant 160 per dollar mark. He stated during a regular press conference that the government is prepared to take appropriate measures to manage any excessive currency fluctuations.
Hayashi emphasized that such volatility in foreign exchange rates is problematic because it can negatively impact both companies and households, affecting their economic activities.
What’s on the radar
This week, investors are closely watching Friday’s US personal consumption expenditures (PCE) price index report, which is the Fed’s preferred inflation measure and is expected to indicate easing price pressures. There is an expectation of about two interest rate cuts this year, with a 61 per cent likelihood of a 25-basis-point cut in September, while the Fed’s latest projection suggests a potential rate cut in December.
Key data releases this week also include durable goods orders, weekly jobless claims, final first-quarter GDP figures, and the annual Russell index reconstitution. Several quarterly earnings reports are also on the docket.
On Thursday, President Joe Biden and Republican rival Donald Trump will debate in Atlanta, an event that could impact the tight race for the November election, according to recent polls.
Investors will be paying attention to comments from Federal Reserve governors Michelle Bowman and Lisa Cook, as well as the Conference Board’s consumer confidence index for June.
In the UK, there are no major economic reports scheduled for release this week. With the British parliamentary election looming less than two weeks away, market caution is on the rise.
Asian markets mostly flat following tech sell-off on Wall Street
The S&P 500 fell by 0.29 per cent, ending the day at 5,448.89 points, while the Nasdaq Composite decreased by 1.09 per cent to close at 17,499.17. Conversely, the Dow Jones Industrial Average rose by 0.66 per cent, reaching 39,408.32.
Within the S&P 500’s 11 sectors, only technology and consumer discretionary saw declines, whereas the energy sector led the gains with a 2.73 per cent increase.
Nvidia dropped 6.68 per cent for the third consecutive session, with analysts pointing to profit-taking after its rapid rise last week, which had made it the world’s most valuable company.
Other semiconductor stocks such as Taiwan Semiconductor Manufacturing, Broadcom, Marvell Technology, and Qualcomm saw declines ranging from 3.53 per cent to 5.7 per cent, causing the chip stocks index to fall by 3.02 per cent.
In Asian markets, Japan’s Nikkei 225 climbed 0.5 per cent, while Chinese stocks had modest gains; blue chips edged up by 0.1 per cent, and Hong Kong’s Hang Seng index increased by 0.9 per cent.
The Topix index in Japan rose by 1.3 per cent, with robotics company Keyence, up by 0.9 per cent, making a significant contribution due to its large market capitalization. Taiwan’s Taiex index fell by 1.2 per cent, following a 1.1 per cent drop in the Nasdaq Composite on Monday, with Taiwan Semiconductor Manufacturing Company, the world’s largest chip producer, slipping by 1.1 per cent.
Futures for the S&P 500 and Nasdaq remained unchanged. In Europe, EURO STOXX 50 futures rose slightly by 0.04 per cent. The FTSE 100 finished Monday up by 0.5 per cent, but its futures indicated a weak start for Tuesday, decreasing by 0.22 per cent to 8,327.5 points.
In commodities, oil prices were stable. Brent crude held at $85.95 per barrel, and US crude remained around $81.60 per barrel. Gold prices fell by 0.3 per cent to $2,325.52 per ounce.