Asian stock markets experienced a decline on Friday, with the tech sector taking a hit due to escalating Sino-U.S. tensions. Concurrently, the U.S. dollar continued its impressive winning streak, marking its longest run in nine years. This surge in the dollar came as investors braced themselves for the likelihood of sustained higher interest rates in the United States.
In the early trading hours, MSCI’s broadest index of Asia-Pacific shares outside Japan dipped by 0.2%, adding to a weekly loss of 1.4%. Storms in Hong Kong forced the closure of markets for the morning, while Japan’s Nikkei fell by 0.8%.
In recent days, Apple (NASDAQ:AAPL) saw approximately $200 billion wiped off its market capitalization due to reports of China restricting the use of iPhones by state employees. Furthermore, concerns over protectionism weighed on shares of chip suppliers across Asia.
Taiwan’s TSMC, a major Apple supplier, saw its shares drop by 1% at the market’s opening. Similarly, South Korea’s SK Hynix, whose chips are found in China’s Huawei Technologies’ new phones, experienced a decline of as much as 4.5%, reaching a two-week low.
Shares of Tokyo Electron fell by 4.3%.
Capital.com analyst Kyle Rodda commented on the situation, saying, “China’s partial ban on Apple products put trade wars and U.S.-China decoupling back on the agenda. The ban is narrow in scope; however, it illustrated the two-way costs and risks of de-coupling.”
The decline in U.S. tech stocks persisted, with overnight losses dragging the S&P 500 down by 0.3% and the Nasdaq falling by 0.9%. S&P 500 futures remained flat in Asia on Friday.
This downturn coincided with the upward momentum in U.S. yields, reflecting expectations that U.S. interest rates would remain at 20-year highs. Consequently, the U.S. dollar continued its ascent, registering its eighth consecutive week of gains against a basket of currencies and pushing the U.S. currency index more than 5% higher.
The dollar’s gains have driven the Chinese yuan to a 16-year low and prompted increased rhetoric from Japanese policymakers who are growing concerned about the yen’s depreciation.
Analysts at ANZ Bank noted, “Given challenges facing China, and more signs of a re-tightening of the U.S. jobs market, it is not surprising that the dollar is finding support, allowing the ‘dollar juggernaut’ to continue its rampaging run.”
The euro recorded a 0.5% decline for the week and traded steadily at $1.0715 in Asia, with investors anticipating a holding pattern rather than a hike from the European Central Bank next week.
The yen reached new 10-month lows and, at 147.13 per dollar, is approaching the 150 level, where traders perceive a higher likelihood of authorities intervening to provide support.
Japan’s top currency diplomat, Masato Kanda, stated that authorities wouldn’t rule out any option to curb “speculative” moves, while Chief Cabinet Secretary Hirokazy Matsuno expressed a sense of urgency, stating that the government was closely monitoring the situation.
The Australian dollar faced a weekly decline of more than 1% and traded at $0.6384 on Friday. Benchmark 10-year U.S. Treasury yields saw an increase of 5.5 basis points, reaching 4.22% for the week, while two-year yields climbed by 6.6 basis points to 4.93%.
Although Brent crude prices saw weekly gains, supported by robust U.S. data, they were tempered by weakening demand indicators in Europe and China. Brent futures remained stable at $89.60 per barrel, reflecting a 1.2% gain for the week.
