(Bloomberg) — Tech shares slumped globally, with Nasdaq futures losing more than 1%, on concern that the US may adopt harsher restrictions on Chinese trade and semiconductor technology.
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Nvidia Corp., Intel Corp. and Apple Inc. retreated in trading before the open of US exchanges. ASML Holding NV tumbled 6%, with technology shares also leading the retreat in Europe. The Biden administration is considering using the most severe trade restrictions available if companies including ASML continue to give China access to advanced semiconductor technology, Bloomberg News reported on Wednesday.
“Biden knows that 75% of the US electorate is unfavorable toward China overall so it makes sense for him to talk up tariffs,” said Justin Onuekwusi, chief investment officer at St James Place.
Republican presidential candidate Donald Trump, speaking in an interview with Bloomberg Businessweek, also questioned whether the US has a duty to defend Taiwan, a major hub of semiconductor manufacturing.
The move in stocks represents a small pullback after a steller run of gains, with the S&P 500 closing at another all-time high on Tuesday. Optimism that the Federal Reserve will cut interest rates and soft inflation data has driven investors to rotate money out of mega-cap shares and into small-caps. Over the past four sessions, the Russell 2000 has beaten the Nasdaq 100 by almost 12 percentage points — a feat not seen since 2011.
“There is a chance that the market has gotten a little bit too excited about the Fed’s ability to cut interest rates in an environment where inflation isn’t yet down to target and there are these overhanging fears,” John Taylor, director of global multisector strategies at AllianceBernstein, said in an interview with Bloomberg TV. “You’re looking at greater tariffs, which is itself inflationary.”
In currencies, the pound topped $1.30 as traders pared bets on an interest-rate cut in August after stickier-than-expected inflation data. The yen rallied 1% against the dollar, reducing the need for Japanese authorities to step into the market again.
Investors also sifted through earnings reports. Adidas AG gained 5% after raising its annual profit target for the second time in three months. Roche Holding AG jumped on promising early-stage study results for a weight-loss pill.
Key events this week:
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Eurozone CPI, Wednesday
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US housing starts, industrial production, Wednesday
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Fed Beige Book, Wednesday
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Fed’s Thomas Barkin speaks, Wednesday
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ECB rate decision, Thursday
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US initial jobless claims, Philadelphia Fed manufacturing, Conference Board LEI, Thursday
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Fed’s Mary Daly, Lorie Logan and Michelle Bowman speak, Thursday
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Fed’s John Williams, Raphael Bostic speak, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures fell 0.7% as of 5:23 a.m. New York time
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Nasdaq 100 futures fell 1.2%
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Futures on the Dow Jones Industrial Average fell 0.2%
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The Stoxx Europe 600 fell 0.5%
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The MSCI World Index rose 0.1%
Currencies
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The Bloomberg Dollar Spot Index fell 0.3%
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The euro rose 0.4% to $1.0938
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The British pound rose 0.4% to $1.3030
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The Japanese yen rose 1.2% to 156.40 per dollar
Cryptocurrencies
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Bitcoin rose 1.2% to $65,454.25
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Ether rose 1.6% to $3,496.04
Bonds
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The yield on 10-year Treasuries was little changed at 4.16%
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Germany’s 10-year yield declined one basis point to 2.41%
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Britain’s 10-year yield advanced one basis point to 4.06%
Commodities
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West Texas Intermediate crude was little changed
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Spot gold rose 0.1% to $2,472.69 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson and Winnie Hsu.
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