Asian stock markets rebounded from one-month lows on Tuesday, buoyed by a recovery in semiconductor shares, particularly in Taiwan, which ended a five-day losing streak. This upward movement followed a rebound in Wall Street stocks, while falling commodity prices continued to put pressure on the Australian dollar.
The MSCI Asia-Pacific index, excluding Japan, which had dipped to a one-month low on Monday, climbed 0.55% today. Japan’s Nikkei also stabilized, with a 0.3% gain attributed to a recovery in chip stocks. On Wall Street, the S&P 500 and the Nasdaq Composite increased by 1.1% and 1.6% respectively, following a period of heavy selling.
The markets showed little immediate reaction to President Joe Biden’s decision to end his reelection campaign. Investors are now focusing on upcoming earnings reports from Tesla and Alphabet, both of which saw significant gains on Monday.
Mizuho economist Vishnu Varathan noted, “The sentiment towards risk and the support for Kamala Harris from Democrats seem stable. The key question is whether this bullish sentiment will extend more broadly, including to smaller-cap stocks.”
In Taiwan, the benchmark index surged approximately 1.7% early in the day, with shares of semiconductor giant TSMC rising by 2%. TSMC, the most valuable publicly traded company in Asia, had lost around $100 billion in market value over the past week after U.S. presidential candidate Donald Trump expressed ambiguous views on supporting Taiwan and its semiconductor industry.
South Korean chipmakers Samsung and SK Hynix also saw a rebound, with traders willing to overlook the political uncertainties due to the strong demand for chips. ING economist Min Joo Kang remarked, “The reliance on Asian chipmakers is so substantial that it will be challenging for potential U.S. alternatives to replace them in the near future.”
In the bond markets, U.S. yields increased slightly overnight and remained steady in Asia, with the 10-year yield at 4.25% and the two-year yield at 4.51%. Market expectations for two U.S. interest rate cuts later this year have begun to weigh on the dollar, although uncertainty surrounding the U.S. election has prevented a more significant decline.
The euro was stable at $1.089, while the yen appreciated slightly to 156.8 per dollar. China’s unexpected interest rate cuts on Monday, combined with concerns about economic growth following recent soft data, have pressured commodity prices. Dalian iron ore futures and Shanghai copper futures reached their lowest levels since April, while Brent crude futures hit a one-month low at $82.59 per barrel. This decline has pushed the Australian dollar to a three-week low and the New Zealand dollar to an almost three-month low of $0.5966, although analysts anticipate a potential rebound.
“Despite the recent fall in industrial commodity prices, many remain elevated in a longer-term context,” said Corpay strategist Peter Dragicevich. “Given the current copper price levels, the Australian dollar appears ‘cheap,'” he added.
China’s yuan remained steady at 7.2732 per dollar.
