Asia Pacific markets traded lower Thursday morning as major South Korean technology names came under pressure.
The benchmark Kospi slipped 0.5% as major chipmakers sold off in early trade: Samsung shares dropped 0.88% while SK Hynix fell 0.78%.
Trade data for July showed South Korean exports fell 11% on-year, which was slightly better than the 11.3% drop analysts predicted. In particular, semiconductor exports dropped 28.1%, Reuters reported. Imports declined 2.7% compared to the 8.1% expected.
Thursday’s trade numbers came amid an ongoing trade dispute between Seoul and Tokyo.
Last month, Japan placed restrictions on exports of important high-tech materials to South Korea that are used by tech companies.
The situation could escalate further if Japan removes South Korea from a list of trusted trade partners that enjoy preferential treatment. Prime Minister Shinzo Abe’s cabinet plans to endorse Seoul’s removal from the so-called ‘white list,’ which is expected to go into effect late August, the Nikkei business daily reported.
Elsewhere, Japan’s Nikkei 225 slipped 0.96% in early trade while the Topix index shed 0.68%. Australia’s S&P/ASX 200 shed 0.44%, as most of the sectors traded lower.
The MSCI Asia ex-Japan index declined 0.4%.
Economic data
Investors will be watching for the release of a private survey of Chinese economic activity, with the Caixin Purchasing Managers’s Index for July set to be released at 9:45 a.m. HK/SIN.
Official data released Wednesday showed Chinese factory activity contracting for the third straight month in July.
The United States and China, meanwhile, wrapped up a round of trade talks on Wednesday and will resume negotiations in Washington in early September.
The two sides conducted “frank, efficient and constructive in-depth exchanges” on major economic and trade issues, according to Chinese state-run media Xinhua. The White House said Wednesday that both sides discussed topics such as forced technology transfer, intellectual property rights, services, non-tariff barriers and agriculture.
U.S. President Donald Trump and Chinese President Xi Jinping reached a truce in June at the G-20 summit in Japan after trade talks collapsed in May that prompted a steep U.S. tariff hike on $200 billion of Chinese goods.
Fed
Overnight, the Fed cut rates by 25 basis points in a widely expected move, citing “global developments” and “muted inflation” as reasons. But Fed Chairman Jerome Powell dampened hopes of further rate cuts later this year. He told reporters that Wednesday’s rate cut was “not the beginning of a long series of rate cuts.”
“Powell suggested the Fed isn’t in a long cutting cycle and that the cut was aimed at insuring against downside global risks, he also added that the cut was not necessarily a one-off,” Felicity Emmett, from ANZ Research, wrote said in a morning note.
“This suggests the future policy path will depend on whether global data is feeding negatively back into the US. So far, the manufacturing sector has shown weakness in line with the global slump, but the much larger services sector is holding up,” Emmett added.
Asia-Pacific Market Indexes Chart
Stocks finished lower on Wall Street overnight: The Dow closed 333.75 points down at 26,864.27 while the S&P 500 fell 1.1% to finish at 2,980.38. The Nasdaq Composite closed 1.2% lower at 8,175.42.
Currencies and oil
The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 98.615 after soaring from levels below 98.1 yesterday.
The Japanese yen traded at 108.84 against the dollar after weakening from the 108.5 handle in the previous session. Meanwhile, the Australian dollar changed hands at $0.6842 after dropping from highs around $0.690 yesterday.
Oil prices dropped in the morning of Asian trading hours, with the international benchmark Brent crude futures contract falling 1.66% to $63.97 per barrel and U.S. crude futures slipping 1.74% to $57.56 per barrel.
Here is a look at some of the data set to be released later today:
- China: Caixin Purchasing Managers’ index for July at 9:45 a.m. HK/SIN
- Hong Kong: Retail sales data for June at 4:30 p.m. HK/SIN
- Hong Kong earnings: Standard Chartered at 12:15 p.m. HK/SIN
- Japan earnings: Mitsubishi Corp, Mazda Motor, Asahi Group
