Global technology stocks experienced a sharp decline, with Nasdaq futures falling by over 1%, as concerns mount over potential stricter U.S. trade policies affecting Chinese trade and semiconductor technology. Major tech companies, including Nvidia Corp., Intel Corp., and Apple Inc., saw their shares retreat ahead of the U.S. market opening. ASML Holding NV plummeted 6%, leading a broader technology sector slump in Europe. The Biden administration is contemplating implementing severe trade restrictions if firms like ASML continue to provide China with advanced semiconductor technology.
Justin Onuekwusi, Chief Investment Officer at St James Place, commented, “Biden is aware that a significant portion of the U.S. electorate harbors unfavorable views towards China. It’s therefore understandable that he would advocate for increased tariffs.”
Republican presidential candidate Donald Trump, also questioned America’s obligation to defend Taiwan, a crucial player in semiconductor production.
This drop in tech stocks represents a minor setback following a period of substantial gains, with the S&P 500 achieving another record high on Tuesday. Investor optimism regarding potential Federal Reserve interest rate cuts and favorable inflation data has led to a shift from large-cap stocks to smaller-cap stocks. The Russell 2000 has outperformed the Nasdaq 100 by nearly 12 percentage points over the past four sessions, a performance not seen since 2011.
John Taylor, Director of Global Multisector Strategies at AllianceBernstein, noted , “There is a risk that the market might be overly optimistic about the Fed’s capacity to lower interest rates in an environment where inflation remains above target, compounded by looming tariff concerns. Increased tariffs could exacerbate inflation.”
In currency markets, the British pound rose above $1.30 as traders adjusted their expectations for an August interest rate cut following unexpectedly persistent inflation data. The Japanese yen strengthened by 1% against the dollar, reducing the likelihood of further intervention by Japanese authorities.
Investors also reviewed recent earnings reports. Adidas AG saw a 5% increase in its stock price after revising its annual profit forecast upward for the second time in three months. Roche Holding AG’s shares surged following promising early results from a weight-loss drug study.
Upcoming Key Economic Events:
1.Eurozone Consumer Price Index (CPI), Wednesday
2.U.S. Housing Starts and Industrial Production, Wednesday
3.Federal Reserve Beige Book, Wednesday
4.Fed’s Thomas Barkin Speech, Wednesday
5.European Central Bank (ECB) Rate Decision, Thursday
6.U.S. Initial Jobless Claims, Philadelphia Fed Manufacturing Index, and Conference Board Leading Economic Index (LEI), Thursday
7.Fed’s Mary Daly, Lorie Logan, and Michelle Bowman Speeches, Thursday
8.Fed’s John Williams and Raphael Bostic Speeches, Friday
Market Summary:
Stocks:
1.S&P 500 futures down 0.7%
2.Nasdaq 100 futures down 1.2%
3.Dow Jones Industrial Average futures down 0.2%
4.Stoxx Europe 600 down 0.5%
5.MSCI World Index up 0.1%
Currencies:
1.Bloomberg Dollar Spot Index down 0.3%
2.Euro up 0.4% to $1.0938
3.British pound up 0.4% to $1.3030
4.Japanese yen up 1.2% to 156.40 per dollar
Cryptocurrencies:
1.Bitcoin up 1.2% to $65,454.25
2.Ether up 1.6% to $3,496.04
Bonds:
1.Yield on 10-year Treasuries unchanged at 4.16%
2.Germany’s 10-year yield down one basis point to 2.41%
3.Britain’s 10-year yield up one basis point to 4.06%
Commodities:
1.West Texas Intermediate crude stable
2.Spot gold up 0.1% to $2,472.69 per ounce
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