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Markets weighed down by Iran tensions and chip sell-off

Global risk sentiment deteriorated midweek as a renewed military flare-up between the US and Iran, combined with another wave of profit-taking in semiconductor stocks and fresh inflation concerns, dampened appetite for equities. US technology shares fell on Tuesday with the Nasdaq 100 underperforming, and Asian markets followed lower on Wednesday, led by a steep slide in South Korea’s KOSPI. Moves in other assets were mixed, with gold and bitcoin retreating even as volatility picked up and oil prices held relatively steady despite US strikes on Iranian assets near the Strait of Hormuz. Later on Wednesday, investors will focus on the latest US Consumer Price Index report.

  • Date
  • Author Shane Strowmatt, Senior Investment Writer
  • Reading time 5 minutes

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Asian equities declined on Wednesday as renewed military confrontation between the US and Iran, combined with profit-taking in high-flying chipmakers and fresh inflation concerns, weighed on risk appetite. South Korea’s KOSPI dropped 6.4% after another sharp sell-off in semiconductor names, while Japan’s Nikkei 225 fell 2% as stronger-than-expected May producer prices, driven by higher fuel costs linked to the Iran conflict, fuelled speculation the Bank of Japan could tighten policy further at its meeting next week. Australia’s S&P/ASX 200 was bucking the trend, trading 0.3% higher, while India’s Nifty 50 was up 0.6%. Oil prices were largely stable, after US forces carried out what they called proportional self-defence strikes against Iranian air defences, ground control and surveillance sites near the Strait of Hormuz on Tuesday evening, responding to the previous day’s downing of a US Army Apache helicopter near the coast of Oman. Gold prices retreated about 1.4% on Wednesday, trading around USD 4200 per ounce, while the US dollar was slightly weaker and bitcoin declined again.

China’s producer prices surge on energy shock

Hong Kong’s Hang Seng Index was down 1%, and mainland China’s CSI 300 was 1.2% weaker on Wednesday as investors digested hotter producer price data and lingering concerns about domestic demand. China’s producer price index rose 3.9% year-on-year in May, the fastest increase since July 2022 and up from 2.8% in April, according to data released by the National Bureau of Statistics on Wednesday. The acceleration reflected sharply higher input costs linked to the Iran conflict, which has disrupted energy and raw material supplies through the Strait of Hormuz, with factories’ purchasing prices for fuel and power up 10% and non-ferrous metal materials and wires up 22%, alongside strong demand for artificial-intelligence-related computing power. Consumer price inflation remained modest, with headline CPI up 1.2% year-on-year in May, below economists’ projections and down 0.1% on the month, while core inflation eased slightly to 1.1% and food prices fell 1.7%, underscoring weak domestic demand. Supply-driven reflation is squeezing Chinese manufacturers’ margins as they struggle to pass on higher costs, even as exports, particularly of renewable and AI-related goods, showed robust 19.4% annual growth in May.

Nasdaq falls as chip stocks slide

US technology shares declined on Tuesday as weakness in semiconductor stocks weighed on the Nasdaq 100, which closed 1.1% lower at 29,084.50 points after earlier sharper losses. The broader S&P 500 slipped 0.3% to 7386.65 points, while the Dow Jones Industrial Average added 0.2% to 50,872.11 points, continuing its stronger relative performance after the Nasdaq had already dropped 4.8% on Friday amid renewed interest rate worries. Pressure on chipmakers such as Marvell Technology, Arm Holdings, Qualcomm, Cisco and AMD likely stemmed from profit-taking ahead of large US initial public offerings, including those planned by space company SpaceX and artificial intelligence firms Anthropic and OpenAI, which are expected to draw liquidity away from recent winners.

German exports and imports edge higher

German exports increased by 0.9% in April on a calendar and seasonally adjusted basis to EUR 136.6 billion, while imports rose 1.2% to EUR 122.1 billion, according to data released on Tuesday. Compared with April last year, exports were up 3.6% and imports grew 6.2%, narrowing the adjusted trade surplus to EUR 14.5 billion from EUR 14.7 billion in March and EUR 16.9 billion a year earlier. Trade with EU partners picked up modestly, with exports to the bloc rising 1% on the month and imports 0.4%, while exports to non-EU markets remained mixed, including a 1.8% monthly increase in exports to the US but a 3.5% decline to China. On the import side, Germany bought more goods from China and the US, whereas deliveries from the United Kingdom decreased. European stock markets slipped on Tuesday: The Euro Stoxx 50 lost 0.2%, while Germany’s DAX underperformed with a decline of 0.7%. The Swiss Market Index gained 0.3%.

Corporate and economic calendar

Corporate news in focus: Quarterly figures from Oracle.

Economic data in focus: US Consumer Price Index (14:30) and Bank of Canada interest rate decision (15:45).

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Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.