Asia report: Markets fall as tech stocks join global sell-off

(Sharecast News) - Asia-Pacific markets fell on Friday, led by a sharp decline in South Korean stocks, as weakness in Wall Street technology names spread into the region and investors continued to monitor Middle East tensions and efforts to end the conflict.

"Global risk sentiment is under pressure as the AI-led equity rally finally shows signs of fatigue," said Patrick Munnelly, market strategy partner at TickMill.

"Nasdaq 100 futures are down 0.9%, pointing to a third consecutive day of losses, while Asian equities fell sharply.

"MSCI's regional benchmark dropped 1.4%, and South Korea's Kospi - one of this year's clearest expressions of the AI trade - slumped 4.7%."

Overnight in the US, the Dow Jones Industrial Average rallied 874.86 points, or 1.73%, to a record 51,561.93, while the Nasdaq Composite fell 0.09% to 26,830.96 and the S&P 500 rose 0.41% to 7,584.31.

The rotation came after Broadcom slid more than 12% when its fiscal second-quarter revenue missed estimates, prompting investors to reduce exposure to AI-linked stocks.

The VanEck Semiconductor ETF lost more than 1%, Arm Holdings shed more than 4%, and Micron Technology fell close to 8%.

"The key point is that this does not yet look like the end of the AI theme," Munnelly said.

"It looks more like a repricing of expectations after a rally that had become heavily one-directional.

"The issue for markets is that AI optimism is now colliding with a less friendly macro setup: oil remains elevated, central banks are still concerned about inflation, and today's US payrolls report could test expectations for Fed policy."

Stocks also remained under pressure from Middle East uncertainty, with mixed signals emerging from negotiations to end the war, which has disrupted global markets and pushed oil and gasoline prices higher.

Brent crude futures were last down 0.14% on ICE at $94.90 per barrel, while the NYMEX quote for West Texas Intermediate fell 0.24% to $92.82.

"Oil has recovered some ground, with Brent moving toward $95.50 per barrel after optimism around the Israel-Lebanon ceasefire faded slightly," Munnelly said.

"Traders are still watching whether regional diplomacy can create a path toward broader US-Iran negotiations, but the physical and geopolitical risks have not gone away."

Munnelly said markets had spent much of the past two weeks assuming that a deal would eventually normalise flows through the Strait of Hormuz.

"As long as that remains the baseline, oil can stay below the panic levels seen in mid-May," he said.

"But if ceasefire optimism fades further, the energy shock quickly becomes the dominant macro driver again."

Markets in the red across Asia

Japan's Nikkei 225 fell 1.31% to 66,588.12, while the broader Topix slipped 0.07% to 3,949.09.

Sumco Corporation dropped 7.44%, Ibiden lost 6.92%, and Tokyo Electron declined 6.61%.

Japanese household spending fell 0.5% year on year in April, easing from a 2.9% decline in March and beating expectations for a 1.5% drop.

It marked the fifth consecutive month of contraction in personal consumption, but the mildest fall in that sequence, suggesting softer inflation pressures may be supporting spending.

On a seasonally adjusted monthly basis, household expenditure rose 1.6%, rebounding from a 1.3% fall in March and exceeding forecasts for a 0.8% increase.

"Japan adds another layer to the rates story," Munnelly said.

"Real cash earnings surprised to the upside at 1.9% year-on-year in April, up from 1.0%, further strengthening the case for BoJ tightening.

"Market pricing for a June hike is now above 95%."

Munnelly said USD-JPY still remained close to 160, even after finance minister Katayama reiterated that "bold actions" were permitted within the US-Japan foreign exchange agreement.

"The revelation that Japan previously sold foreign securities to fund yen intervention is important," he said.

"If that includes US Treasuries, there may be limits to how comfortable Washington is with repeated large-scale intervention to support the yen."

In China, the Shanghai Composite fell 0.74% to 4,027.74, while the Shenzhen Component dropped 2.21% to 15,314.70.

Guangxi Guidong Electric Power fell 10.02%, Huadian Energy lost 10.01%, and Jiangsu Lettall Electronic declined 10%.

Hong Kong's Hang Seng Index dropped 1.15% to 24,961.95.

SMIC fell 7.18%, China Mengniu Dairy lost 6.31%, and Tingyi declined 6.1%.

South Korea led regional losses, with the Kospi 100 plunging 6.1% to 10,144.64 as heavyweight technology stocks sold off.

Samsung C&T fell 13.93%, Doosan Robotics lost 11.15%, and SK Hynix dropped 9.92%.

Adding to pressure on the sector, South Korea's labour minister urged the country's largest technology companies to share more of the gains from the AI-driven semiconductor boom with workers and suppliers, warning that record profits risk worsening income inequality.

"SK Hynix fell around 8%, dragging the wider chip complex lower and reinforcing the message that investors are taking profits after an extraordinary run," Munnelly said.

Munnelly added that Asia was also back in focus through foreign exchange, with the Korean won weakening to its lowest level since 2009 despite the strength of the country's AI-linked export cycle.

"That suggests dollar earnings are still not being recycled aggressively into local currency and that foreign investors are becoming more selective on regional risk," he said.

"The broader message is that Asian FX is becoming a more important pressure valve for global risk sentiment."

Australian stocks in the red, Wellington manages gains

In Sydney, Australia's S&P/ASX 200 declined 0.7% to 8,625.10.

Liontown Resources dropped 6.14%, Mineral Resources fell 5.08%, and Genesis Minerals lost 4.46%.

Across the Tasman Sea New Zealand stocks outperformed, with the S&P/NZX 50 rising 0.46% to 13,161.97.

Pacific Edge gained 7.14%, EBOS Group rose 3.13%, and Goodman Property Trust added 2.49%.

Dollar mixed against regional peers

In currencies, the dollar was last down 0.04% on the yen to trade at JPY 159.95, as it rose 0.01% against the Aussie to AUD 1.4018, and slipped 0.13% on the Kiwi to change hands at NZD 1.7022.

"Markets are entering payrolls Friday with risk appetite already dented by AI fatigue," Munnelly said.

"The labour-market setup is firm enough that an upside surprise could reinforce higher-for-longer pricing, pressure gold and add to the equity wobble.

"Meanwhile, oil remains a geopolitical swing factor, Japan is inching toward another hike, and the ECB is preparing to signal that the energy shock still matters."

Reporting by Josh White for Sharecast.com.