Asia report: Most markets fall on back of tech sell-off

Most markets in Asia closed in the red on Tuesday, taking their cues from a massive sell-off of technology plays on Wall Street overnight.

In Japan, the Nikkei 225 slid 3.08% to 28,608.59, as the yen strengthened 0.11% against the dollar to last trade at JPY 108.69.

Of the major components on the benchmark index, robotics specialist Fanuc fell 3.97%, Uniqlo owner Fast Retailing slipped 0.71%, and technology giant SoftBank Group plunged 6.51%.

The broader Topix index was 2.37% lower by the end of trading in Tokyo, closing at 1,905.92.

On the mainland, the Shanghai Composite managed gains of 0.4% to 3,441.85, and the smaller, technology-centric Shenzhen Composite eked out a rise of 0.36% to 2,251.96.

Fresh data out of China showed a 0.9% rise in consumer prices year-on-year in April, just shy of the 1% expected by analysts polled by Reuters.

The producer price index topped expectations, meanwhile, coming in at 6.8%, compared to the 6.5% anticipated.

China’s 10-yearly census data was also released on Tuesday, with the country’s population growth slowing to 0.53% in the 2011-2020 period, from 0.57% in the first decade of the new millennium.

South Korea’s Kospi was off 1.23% at 3,209.43, while the Hang Seng Index in Hong Kong lost 2.03% to 28,013.81.

Chinese food delivery behemoth Meituan was down 5.25% in the special administrative region, and internet conglomerate Tencent was 1.76% weaker, amid jitters around Beijing’s ongoing regulatory crackdown on technology firms.

Seoul’s blue-chip technology stocks were on the back foot, with Samsung Electronics down 2.4% and SK Hynix falling 5.38%.

“If you are looking for inflation signals, China’s factory gate prices are a pretty good leading indicator,” said Markets.com chief market analyst Neil Wilson.

“So today’s report showing that producer price inflation rose 6.8% from a year earlier in April, the fastest pace in more than three years, could be of concern.

“Tomorrow’s US CPI numbers are going to be closely watched.”

Wilson noted that on Friday, the market suggested that an “easier-for-longer Fed” should help risk assets, adding that whatever the Fed was going for in terms of its employment mandate, the bond market would move if inflation took off.

“The wage component of the jobs report was underappreciated - a lack of employees will drive up wages and end prices.

“Wage-push inflation is more ‘dangerous’ than cost-push.

“My worry is we have a perfect storm of wage-push, cost-push and demand-pull pressures that won’t be as transitory as the Fed thinks - ignoring the fact that inflation is here already, has been for years in asset prices, just not in the narrow gauges used by central banks.”

US 10-year yields were sitting at their highest in about a fortnight, Wilson pointed out, while five-year breakeven inflation expectations remained elevated at multi-year highs above 2.7%.

Oil prices were lower as the region went to bed, with Brent crude last down 0.72% at $67.83 per barrel, and West Texas Intermediate off 0.74% at $64.44.

In Australia, the S&P/ASX 200 was down 1.06% at 7,097.00, ahead of the federal government’s budget announcement in Canberra after the close in Sydney.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 slipped 0.16% to 12,639.19, led lower again by China-exposed specialist dairy exporter A2 Milk, which was down 6.5% by the end of the day in Wellington.

Both of the down under dollars were stronger against the greenback, with the Aussie last ahead 0.27% at AUD 1.2738, and the Kiwi advancing 0.33% to NZD 1.3723.