Asian stocks fall as investors look past bullish tech earnings

TOKYO, July 16 (Reuters) – Asian stocks fell on Friday as profit-taking by Taiwanese chip giant TSMC, despite record profits, weighed on other tech companies and a broader sense of risk, while A more dovish outlook on US rates has kept bond yields close to several months low.

Europe’s lead was mixed with Eurostoxx 50 and Spanish IBEX futures barely changed, German Dax futures up 0.1%, while those on London’s FTSE increased by 0.3%.

The largest MSCI Asia-Pacific equity index outside of Japan (.MIAPJ0000PUS) fell 0.4%, weighed down by a decline of 0.8% each in China’s blue-chip index (.CSI300) and Taiwanese stocks (.TWII) after TSMC earnings on Thursday.

TSMC (2330.TW), Asia’s largest company by market capitalization outside of China, fell nearly 4% after its results on Thursday. Read more

As the world’s largest contract chipmaker posted record quarterly sales and forecast higher earnings, investors took profits, fearing its best times were already behind it.

“His earnings were great and to me the market seems a bit over the top,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities. “But the drop in its profit margin has led to believe that its growth momentum could peak.”

TSMC’s fall weighed on many other semiconductor-related stocks in the region, with South Korea’s Kospi (.KS11) down 0.4% and Japan’s Nikkei (.N225) losing around 1%.

Weakness in chip-related stocks also helped push the S&P 500 (.SPX) down 0.33% and the Nasdaq Composite (.IXIC) down 0.70% on Thursday.

While these indices remained near record highs, supported by the outlook for an economic recovery, investors were wary of riskier and less liquid assets.

The Russell 2000 US Small Cap Index (.RUT) fell 0.6% to a nearly two-month low. Special Purpose Acquisition Companies (SPAC), or “blank check companies”, were completely out of favor, with the Ipox Spac (.SPAC) index hitting its lowest level in seven months.

Investors instead flocked to bonds, after Federal Reserve Chairman Jerome Powell reiterated that the rise in inflation would likely be transient and the US central bank would continue to support the economy.

Powell on Wednesday pledged “strong support” to complete the United States’ economic recovery from the coronavirus pandemic, a message he repeated on Thursday. Read more

The yield on 10-year US Treasuries fell to 1.302%, approaching the five-month low of 1.250% reached last week.

The yield on US inflation-protected bonds fell to minus 1.043%, a five-month low.

Bond yields fell even as data earlier this week showed US consumer inflation hitting its highest level in 13 years. Read more

“Short positions in bonds just don’t work, so much so that you just lose strength,” said Arihiro Nagata, managing director of global investments at Sumitomo Mitsui Bank. “You can’t fight the Fed when there’s such massive easing.”

On the currency front, major currencies were little changed that day, but the dollar headed for its best weekly gain in about a month.

“Delta variants are rife in countries with limited vaccination. In a way, the dollar and US assets seem to be bought as a hedge against this,” Sumitomo Mitsui’s Nagata said.

The kiwi was the biggest driver among the majors in the Asian session, and was last up 0.6% to $ 0.7020.

Gold, meanwhile, hit a one-month high at $ 1,834.3 an ounce and settled at $ 1,825.4 for the last time, supported by an accommodating Fed.

Oil prices were heading towards their biggest weekly decline since at least May as expectations of increased supply spooked investors, with OPEC likely to increase production to meet a potential pick-up in demand as more countries are recovering from the pandemic.

U.S. crude futures fell 32 cents to $ 71.33 a barrel, near last week’s low of $ 70.76. Brent futures slipped 35 cents to $ 73.11 a barrel.

Additional reports by Swati Pandey; Editing by Sam Holmes

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