Asia report: Markets fall on back of Wall Street tech sell-off

(Sharecast News) - Asia-Pacific markets closed lower on Tuesday after giving up early gains, as global equities came under pressure following a sharp sell-off in technology stocks on Wall Street.

"The relief rally is being tested," said Patrick Munnelly, market strategy partner at TickMill.

"Oil below $78 per barrel shows that Middle East risk premia are still unwinding, but equities are now more focused on tech profit-taking and higher bond yields."

Investors rotated out of the 'Magnificent Seven' names on Wall Street on Monday, with Amazon dropping nearly 5% and Meta Platforms falling 2%.

Alphabet slid 5%, its worst daily performance in more than a year, as concerns grew over the departure of two high-profile artificial intelligence researchers to rivals.

SpaceX fell 16%, posting its third consecutive negative session.

Munnelly said global equities were under pressure as investors took profit in technology shares and reduced risk while waiting for more clarity on the US-Iran peace process.

"Tech took the brunt of the damage," he said.

"An Asian technology index ended an eight-day winning streak, and South Korea's Kospi slumped ... as investors questioned whether the recent surge in semiconductor names had run too far."

"This is not a collapse in the AI theme, but it is a reminder that valuation support becomes more fragile when bond yields rise and investors have already crowded into the same winners," he added.

Oil prices also slipped after mediators Qatar and Pakistan said the US and Iran had made progress in talks in Switzerland toward reaching a final deal within 60 days, including an agreement to establish a committee and end military operations in Lebanon.

The US Treasury Department later authorised the sale of Iranian oil through August, pushing crude toward session lows.

Brent crude futures were last down 0.63% on ICE at $77.41 per barrel, while the NYMEX quote for West Texas Intermediate declined 0.41% to $73.56.

"Oil continues to move in the opposite direction," Munnelly said.

"Brent has fallen below $78 per barrel, close to $77, after dropping more than 3% in the previous session."

Munnelly said Washington and Tehran had both reported progress in early talks toward a lasting peace agreement, helping further compress the Middle East risk premium.

"That is positive news for headline inflation and consumers, but it is no longer enough to lift equities on its own," he said.

"The market has already priced in much of the easy relief from lower oil; what matters next is whether peace negotiations actually translate into durable shipping normalisation and a final settlement."

Bourses fall across the region

Japan's Nikkei 225 dropped 3.55% to 69,788.38, while the broader Topix fell 2.56% to 3,990.38.

Furukawa Electric tumbled 15.52%, Kioxia Holdings lost 15.1%, and Mitsui Kinzoku declined 12.62%.

Japan's S&P Global composite PMI rose to 52.5 in June from 51.1 in May, according to flash estimates, marking the strongest reading since March and the 15th consecutive month of private-sector expansion.

Growth was driven by the strongest increase in manufacturing output since January 2022, while services activity expanded modestly.

New orders rose at the fastest pace in four months, supported by a slight increase in foreign demand, while backlogs grew at the quickest rate in four months.

Input cost inflation accelerated for a fifth month to its highest level since July 2022, driven by higher energy, fuel and raw material costs linked to the Middle East war, although output price inflation eased from May's record.

Business sentiment weakened further and remained below average amid supply-chain disruption and persistent labour shortages.

Munnelly said the yen remained a major pressure point, hovering near its weakest level since 1986 and keeping traders alert to possible intervention.

"Japanese finance minister Katayama's discussions with US Treasury secretary Bessent underline that authorities are increasingly uncomfortable with the pace of depreciation," he said.

"The BoJ's recent rate hike has not provided much support because US yields and Dollar strength are doing more work."

"If USD-JPY remains disorderly, the probability of intervention will rise, particularly if officials judge that currency weakness is feeding imported inflation," he added.

In China, the Shanghai Composite fell 1.37% to 4,106.25, while the Shenzhen Component dropped 3.17% to 15,854.20.

Xinjiang Sayram Modern Agriculture lost 10.07%, Heilongjiang Agriculture fell 10.03%, and Zhongjin Gold declined 10.02%.

Hong Kong's Hang Seng Index slid 1.82% to 23,336.28.

CMOC Group dropped 10.88%, Xinyi Solar lost 7.96%, and Laopu Gold fell 7.08%.

South Korea led regional losses, with the Kospi 100 plunging 10.58% to 10,403.74, while the benchmark Kospi fell 9.99% as heavyweight chipmakers sold off.

SK Hynix and Samsung Electronics both declined, underscoring the market's reliance on the artificial-intelligence trade that had driven much of this year's rally.

On Monday, SK Hynix briefly overtook Samsung Electronics to become South Korea's most valuable listed company by market capitalisation.

Hanmi Semiconductor dropped 14.43%, Posco ICT lost 12.55%, and Samsung C&T fell 12.5%.

"AI remains a powerful medium-term story, but higher front-end yields and sticky inflation concerns raise the discount rate on long-duration growth assets," Munnelly said.

"Semiconductor stocks in Korea and broader Asian tech had also rallied aggressively, leaving them exposed to a positioning reset."

"A correction after an eight-day winning streak is not necessarily a signal of fundamental deterioration, but it does show that the market needs fresh evidence to extend the move," he added.

South Korea's composite consumer sentiment index rose by 0.5 points to 95.5 in June.

Sentiment on current domestic economic conditions increased three points to 86, while expectations for future economic conditions slipped one point to 92.

Sentiment on current living standards rose one point to 94, while future living standards were unchanged at 97.

Expectations for future household income and spending remained at 100 and 110, respectively.

One-year inflation expectations stood at 2.8%, while three-year and five-year expectations were 2.7% and 2.6%.

Sydney slips as composite PMI remains in contraction territory

Heading down under, Australia's S&P/ASX 200 fell 0.33% to 8,787.00.

Iluka Resources dropped 10.82%, Technology One lost 7.1%, and Centuria Capital declined 6.58%.

Australia's S&P Global manufacturing PMI rose to 51.2 in June from 50.7 in May, marking a third consecutive month of expansion, supported by modest employment growth.

Production continued to decline slightly, while delivery times lengthened as some suppliers consolidated shipments to reduce costs.

Input prices rose due to higher fuel and transport costs, while output prices also increased, although inflation eased from the previous month.

The flash services PMI rose to 49.9 from 48.7, moving closer to stabilisation but remaining slightly in contraction.

The improvement lifted the composite output index to 49.8 from 48.7, signalling broadly stable private-sector activity.

New orders fell for a fourth consecutive month amid uncertainty, export demand weakened, and business confidence fell to its lowest level since the pandemic.

Employment returned to growth, while firms reduced backlogs at the fastest pace in more than two years.

Across the Tasman Sea, New Zealand's S&P/NZX 50 slipped 0.08% to 13,435.77.

Serko fell 4.35%, Pacific Edge lost 3.23%, and Synlait Milk declined 2.38%.

Dollar weaker on the yen, makes gains on other regional peers

In currencies, the dollar was last down 0.1% on the yen to trade at JPY 161.41, as it rose 0.82% against the Aussie to AUD 1.4399, and gained 0.51% on the Kiwi to change hands at NZD 1.7592.

Reporting by Josh White for Sharecast.com.