Asian stock markets faced a significant downturn on Wednesday, following Wall Street’s steep decline — the worst since early August. The tech sector was notably impacted, with Nvidia shares plummeting by 9.5%, a setback that saw many semiconductor stocks globally following suit.
In Japan, the Nikkei 225 index spiraled down by 3.8%, settling at 37,211.09. Major players like Tokyo Electron experienced a notable loss, down 7% during morning trading. South Korea’s Kospi index dipped by 3.0% to 2,584.81, with tech giant Samsung Electronics sliding 3.1%. Taiwan was not spared either; the Taiex index fell by 4.0%, heavily influenced by a 4.7% drop in Taiwan Semiconductor Manufacturing Company’s stock.
Australia’s S&P/ASX 200 index also dropped, down 2.1% to 7,933.40, despite economic data indicating a 1% GDP growth, slightly higher than what analysts had projected for the second quarter of 2023. The Hang Seng index in Hong Kong decreased by 1.1% to 17,462.25, while the Shanghai Composite index fell by 0.5% to 2,789.39.
Looking stateside, futures suggested a continuing downward trend. The increase in global oil supply, spurred by Libya’s progress towards stabilizing its oil production amidst ongoing conflicts, has contributed to a decline in oil prices. Benchmark U.S. crude saw a dip of 45 cents, settling at $69.89 per barrel, while Brent crude, the international standard, decreased by 42 cents to $73.33.
A cloud of uncertainty looms over China’s economy — the world’s foremost crude oil importer — as recent economic data highlighted concerns over future oil demand. The weak performance stems from a sluggish real estate sector and waning consumer spending, raising alarms about economic stability.
Nvidia’s staggering drop on Tuesday wasn’t its only concern; despite releasing profitable earnings that exceeded expectations, skeptics are now questioning the sustainability of its soaring stock price within the current AI trend frenzy. This drop impacted the broader semiconductor sector, contributing to a downward spiral across global markets.
On the U.S. markets, the S&P 500 fell 2.1%, retreating from a bullish three-week streak that nearly hit an all-time high. The Dow Jones Industrial Average dropped 626 points, or 1.5%, marking a reversal from its recent record set just days prior. The Nasdaq composite was hit hardest, plunging 3.3% due to the influence of Nvidia and other tech giants.
In the bond market, Treasury yields slipped after a report illustrated another contraction in U.S. manufacturing in August — a sector that has been shrinking under the persistent weight of high-interest rates. This continuous decline reveals the reluctance of businesses to invest in capital and inventory amid current monetary policies and prevailing uncertainty in the political landscape.
Upcoming economic reports this week promise further insights into how the economy is faring — from job openings to growth in U.S. service sectors. The most anticipated will be Friday’s employment report, detailing how many new jobs were created in August.
Overall, traders witnessed considerable movement in the S&P 500, which fell by 119.47 points to finish at 5,528.93, while the Dow ended at 40,936.93 with a decrease of 626.15 points. The Nasdaq composite closed at 17,136.30, down 577.33 points. Bond investors also reacted; the yield on the 10-year Treasury dipped to 3.84% from 3.91% seen late last week, marking a significant shift from 4.70% in late April.
In currency markets, the U.S. dollar remained steady at 145.48 Japanese yen, with the euro rising slightly to $1.1054 from $1.1043.
The volatile financial landscape, characterized by fluctuations in Asian markets and uncertainty surrounding U.S. economic indicators, continues to captivate traders and investors alike. With increasing attention on central bank policies and global economic conditions, market participants will be vigilant as they navigate through these turbulent times.