Asian shares retreated on Tuesday after a report indicated that U.S. manufacturing contracted in May, signaling a slowdown in the economy.
Oil prices fell while U.S. futures edged higher.
Japan’s Nikkei 225 index dropped 0.5% to 38,749.25, and South Korea’s Kospi declined 0.4% to 2,672.43. Hong Kong’s Hang Seng was an exception, gaining 0.1% to 18,413.20, while China’s Shanghai Composite index edged down 0.1% to 3,075.09.
Australia’s S&P/ASX 200 decreased 0.1% to 7,751.50, and Taiwan’s Taiex fell 0.7%.
On Monday, U.S. stocks finished mixed. The S&P 500 edged up 0.1% to 5,283.40, despite most stocks within the index declining. The Dow Jones Industrial Average fell 0.3% to 38,571.03, while the Nasdaq composite rose 0.6% to 16,828.67.
In the bond market, Treasury yields declined following a report by the Institute for Supply Management, which showed U.S. manufacturing shrank in May for the 18th time in 19 months. The manufacturing sector has been particularly impacted by high interest rates aimed at controlling inflation, affecting Asian economies reliant on exports.
Analysts questioned the report’s significance, noting the indicator has been declining for most of the past two years. “Why such a distinct wave of U.S. pessimism this time? Was it a manufactured excuse to take profits? Or is there a deeper cause for concern?” commented Tan Jing Yi of Mizuho Bank. “We suspect it is a bit of both.”
The yield on the 10-year Treasury fell to 4.39% from 4.50% late Friday.
This week features several high-profile economic reports that could influence yields further. On Tuesday, the U.S. government will release data on job openings for April, and on Friday, it will provide an update on overall job growth and wage increases.
Stocks of companies closely tied to economic strength suffered the market’s worst losses. The oil-and-gas sector was notably affected as crude prices fell on concerns about weaker fuel demand growth. Halliburton dropped 5.3%, and Exxon Mobil fell 2.4%, with U.S. oil prices down 3.5%. Brent crude, the international benchmark, saw similar losses despite efforts by Saudi Arabia and other oil-producing countries to stabilize prices.
Conversely, some major technology stocks continued to perform well regardless of economic conditions. Nvidia climbed another 4.9%, bringing its year-to-date gain to 132.2% after unveiling new products and services over the weekend, countering criticisms of overzealous investor enthusiasm for AI prospects. Nvidia significantly bolstered the S&P 500.
In another dramatic market move, GameStop soared 21%, reminiscent of its early 2021 surge that introduced “meme stock” into the lexicon. GameStop jumped after a Reddit post from an account associated with a key figure in the 2021 episode revealed a stake of 5 million shares and options to buy more, valued at $181.4 million. The post generated significant online buzz, recalling the stock’s previous irrational surge driven by small investor enthusiasm rather than business fundamentals. Other meme stocks, like AMC Entertainment, also rose, with AMC climbing 11.1%.
In other trading, U.S. benchmark crude oil fell 52 cents to $73.70 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude lost 48 cents to $77.88 per barrel.
The U.S. dollar strengthened to 156.38 Japanese yen from 156.10 yen. The euro inched up to $1.0908 from $1.0904.
