Global equities slid to a one-month low on Tuesday as investors dumped chipmakers over Chinese competition and the cost of the AI boom. South Korea’s KOSPI dived more than 10% and triggered a circuit breaker, while European markets held up better on positive corporate earnings reports.
The MSCI All Country World Price index fell 0.5% to its lowest since June 29 on Tuesday. Rising odds of a U.S. interest rate hike as early as this week further dampened the mood.
Seoul leads the selloff with a circuit breaker
Asian chipmakers sat at the heart of the rout. South Korea’s KOSPI dived more than 10% to a three-month low, triggering a circuit breaker on the way down as it heads for its largest monthly fall on record and surpassing declines suffered during the Asian financial crisis in 1997.
The index had more than tripled in value over the 12 months to June, but it has shed more than a third of its value since that peak. Shares in SK Hynix and Samsung Electronics made losses of more than 12% as their rally unwinds, both under extra pressure in a market transformed by leverage.
China’s chipmaking push knocks ASML
China has begun manufacturing domestically developed immersion deep ultraviolet lithography machines, a chipmaking tool long dominated by Dutch supplier ASML, The Information reported on Monday, sending ASML shares down 8.5%. Meanwhile, China’s CXMT Corp, the world’s fourth-biggest memory maker, listed and raised $8.6 billion on Monday, ending its debut session as China’s most valuable company.
Dorian Carrell, head of multi-asset income at Schroders, pointed to questions over the profitability of the semiconductor space, particularly in Asia: “We think that it’s healthy that the market’s questioning these things.”
Europe outperforms as Wall Street points lower
European stocks outperformed, helped by positive earnings reports from Unilever and Mercedes-Benz that offset losses in technology stocks. Wall Street, however, looked set for a weaker open as Nvidia and Micron Technology’s shares fell in premarket trading.
Nvidia had already shed 5% overnight after the Wall Street Journal reported the company was in talks to provide roughly $250 billion in financing guarantees for OpenAI as part of a massive data centre project.
Oil slides as traders weigh a Fed hike
Brent crude futures extended Monday’s nearly 9% plunge, falling more than 3% to $85.55 a barrel, as a lull in hostilities between the U.S. and Iran followed Washington’s abrupt suspension of air strikes on Saturday. The break in fighting pushed down benchmark 10-year U.S. Treasury yields by about 4 basis points to 4.64% on Monday, but hardly budged shorter-term rates.
Markets have priced about a 35% chance that the Federal Reserve hikes by 25 basis points on Wednesday.
Source: Reuters
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