Asian stocks decline as US tech sector faces setbacks; dollar and yields maintain gains.


Global stocks remained subdued on Friday as investors reacted to disappointing earnings reports from major tech companies Tesla and Netflix. Additionally, the upcoming week was anticipated to be eventful due to central bank interest rate decisions.

Date: July 21, 2023

Place: New Delhi, India

The MSCI World index, representing global shares, maintained its position after experiencing a substantial 16% increase throughout the year. However, Europe’s STOXX 600 index was flat.

Tech stocks in both Europe and Asia declined following significant drops in the stock prices of Tesla and Netflix after their earnings announcements earlier in the week.

Taiwan’s TSMC, the world’s largest chipmaker, saw a 3.3% decrease in its shares on Friday after reporting a predicted drop in sales for 2023 and its first quarterly profit decline since 2019. A sub-index of European technology shares also lost 1.6%.

The Nasdaq index, known for its tech-heavy composition, experienced a 2% drop on Thursday, marking its most significant one-day loss since March. Investors appeared to be taking profits due to concerns over tech stock valuations, which have been driven by optimism about the potential of artificial intelligence, leading the Nasdaq to gain about 40% year-to-date.

Patrick Spencer, vice chair of equities at Baird, commented on the market’s situation, noting that it had become over-bought and that those who had not participated in the market had potentially missed out on gains.

Regarding currencies, the dollar showed strength against the yen, recording its largest one-day rise in a month. This was attributed to indications that the Bank of Japan would maintain its yield-control policy.

The U.S. Federal Reserve and the European Central Bank were set to hold meetings in the coming week, with both expected to raise interest rates as part of their aggressive monetary tightening cycle. The Fed’s approach to addressing above-target inflation in the economy was closely monitored, with the potential for rate increases causing concerns about a deep recession.

In the bond markets, Treasuries settled after anticipating a more hawkish stance from the Fed in response to a surprising drop in weekly unemployment claims. The yields on two-year Treasury notes remained flat, while ten-year Treasury yields eased back slightly.

Oil prices saw an increase, with Brent crude futures rising 1% to $80.41 per barrel and U.S. West Texas Intermediate crude futures also rising 1% to $76.40.

Gold prices remained unchanged at $1,970 per ounce.

Overall, the markets appeared cautious and influenced by various factors such as tech earnings, central bank decisions, and geopolitical events. Investors were closely observing the developments to make informed decisions.


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Sources- Economic Times, Reuters, The Print