Asian Stocks Fall After US Tech Slump; Yen Swings: Markets Wrap

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(Bloomberg) — Asian equities fell as fresh signs of slowing US inflation bolstered rate cut bets and spurred a rotation out of big tech stocks on Wall Street. The yen was volatile.  

Japanese shares fell more than 1% after Thursday’s rally in the yen prompted speculation that authorities had stepped in with official support. The currency fluctuated in early trading Friday amid local media reports the Bank of Japan was conducting so-called rate checks in the market.

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The Kospi Index was dragged lower by South Korea’s tech heavyweights, while Australian shares advanced. The Nasdaq 100 dropped 2.2% Thursday, weighed down by some of the year’s big winners including Nvidia Corp.  

The moves followed data showing US core consumer prices that exclude energy and food rose at the slowest pace since 2021, bolstering the case for Federal Reserve rate cuts. Optimism over lower rates sparked a shift into riskier corners of the US market — as money exited the long-favored safety trade of big tech. 

“The big tech trade is turning on itself, yet the rest of the market is finally stepping in,” said Callie Cox at Ritholtz Wealth Management. While the S&P 500 is down, “this is the best kind of selloff you could hope for if you’re a long-term investor.”

US small-cap stocks were among primary beneficiaries. The Russell 2000 of smaller firms beat the Nasdaq 100 by 5.8 percentage points — the most since November 2020.

The prospect of lower US interest rates sent 10-year Treasury yields seven basis points lower to 4.21% and a gauge of the dollar fell by the largest margin since May. Both moves stabilized early Friday, while Australian and New Zealand government bonds opened higher. 

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Fed Bank of Chicago President Austan Goolsbee described the data as “excellent,” adding the figures provided the evidence he’s been waiting for to be confident the central bank is on a path to its 2% goal. 

To Chris Larkin at E*Trade from Morgan Stanley, July is still a longshot, but Thursday’s “Fed-friendly CPI” got markets one step closer to a September rate cut. A lingering question is whether this high-flying stock market has already priced in multiple cuts, he noted.

Neuberger Berman Group’s Steve Eisman expects the outsized strength in US megacap technology shares will “last for years,” as artificial intelligence becomes more accessible to consumers via electronic devices.

“You have to own the big, large-cap tech stocks,” he told Bloomberg Television in an interview on Thursday. Eisman’s words attract notice on Wall Street because he made a name for himself with his “Big Short” bet against subprime mortgages ahead of the global financial crisis.

In Asia, economic reports due Friday include China trade, Japan industrial output and Indian inflation. China money supply and new loans data may also be released as soon as today.

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West Texas Intermediate, the US oil price, rose for a third day Friday, helped along by slowing inflation reports. Gold was steady after a sharp rally on Thursday.

Key events this week:

• China trade, Friday
• University of Michigan consumer sentiment, US PPI, Friday
• Citigroup, JPMorgan and Wells Fargo’s earnings, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 9:22 a.m. Tokyo time
• Hang Seng futures rose 0.7%
• Japan’s Topix fell 0.8%
• Australia’s S&P/ASX 200 rose 0.7%
• Euro Stoxx 50 futures rose 0.4%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0869
• The Japanese yen was little changed at 158.73 per dollar
• The offshore yuan was little changed at 7.2669 per dollar

Cryptocurrencies

• Bitcoin fell 0.3% to $57,384.46
• Ether fell 0.2% to $3,108.88

Bonds

• The yield on 10-year Treasuries was little changed at 4.21%
• Japan’s 10-year yield was unchanged at 1.080%
• Australia’s 10-year yield declined three basis points to 4.35%

Commodities

• West Texas Intermediate crude rose 0.6% to $83.13 a barrel
• Spot gold fell 0.1% to $2,412.65 an ounce

This story was produced with the assistance of Bloomberg Automation.

(An earlier version of this story was corrected to show that US core CPI excludes food, not housing)

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