Asian stocks rebounded from one-month lows on Tuesday, with Taiwan’s market ending a five-day losing streak as semiconductor shares followed Wall Street’s recovery. However, falling commodity prices weighed on the Australian dollar.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.55% after hitting a one-month low on Monday. Japan’s Nikkei stabilised as chip stocks steadied, resulting in a 0.3% gain for the share average. The S&P 500 rose 1.1%, and the tech-heavy Nasdaq increased by 1.6%, as stocks that had been heavily sold in previous days rebounded. Markets showed little reaction to the end of President Joe Biden’s reelection bid. Investors are now focused on upcoming earnings reports from Tesla and Alphabet, both of which saw significant advances on Monday.
Mizuho economist Vishnu Varathan noted that risk sentiments and Democratic support for Kamala Harris appear to be solidifying. However, it remains to be seen if these gains will extend to smaller caps.
Taiwan’s benchmark index rose about 1.7% in early trade, with shares in chipmaker TSMC jumping 2%. Over the past week, TSMC, Asia’s most valuable listed firm, lost approximately $100 billion in market value after U.S. presidential candidate Donald Trump expressed uncertainty about protecting Taiwan and its chip industry. South Korean chipmakers Samsung and SK Hynix also rebounded, with traders looking past political risks to focus on strong demand.
ING economist Min Joo Kang expressed confidence in the ongoing reliance on Asian chipmakers, suggesting they won’t be easily replaced by potential U.S. counterparts soon.
In bond markets, U.S. yields increased overnight and remained broadly steady in Asia, with benchmark 10-year yields at 4.25% and two-year yields at 4.51%. Markets have factored in two U.S. rate cuts for the second half of the year, which has started to weigh on the dollar, although uncertainty over the U.S. election has prevented a significant drop. The euro held steady at $1.089 on Tuesday, while the yen rose slightly to 156.8 per dollar.
China surprised markets with interest rate cuts on Monday. Concerns over the economic outlook following softer-than-expected growth figures last week have put commodities under pressure. Dalian iron ore futures and Shanghai copper traded at their lowest since April, while Brent crude futures hit a one-month low overnight, last trading at $82.59 a barrel.
This has pulled the Australian dollar down to three-week lows and the New Zealand dollar to an almost three-month low of $0.5966, although analysts predict a rebound. Corpay strategist Peter Dragicevich noted that despite recent falls, many industrial commodity prices remain high from a long-term perspective. Based on current copper prices, he considers the Australian dollar undervalued.
China’s yuan remained stable at 7.2732 per dollar.
Asian markets showed resilience led by semiconductor gains despite the drag from declining commodity prices. Investor attention is now shifting towards upcoming earnings reports and ongoing economic uncertainties.
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