Stocks in Asia were set to follow a big tech-led drop on Wall Street amid concern over how a Chinese ban on Apple Inc.’s iPhone could impact the industry that has driven this year’s market rally. The dollar held gains.
Contracts fell for equity benchmarks in Japan and Hong Kong, where the start of trading was delayed by heavy rains, while those for Australia and the US were flat in early trading. The Nasdaq 100 and S&P 500 fell as Apple slid about 6.5% in two days, while an index of US-traded Chinese stocks dropped the most in more than a month. The dollar is headed for its longest weekly rally in years amid speculation the Federal Reserve will keep interest rates elevated.
China plans to expand a ban on the use of iPhones in sensitive departments to government-backed agencies and state companies, a sign of growing challenges for Apple in its biggest foreign market and global production base. In addition, Beijing intends to extend that restriction far more broadly to a plethora of state-owned enterprises and other government-controlled organizations, people familiar with the matter said.
“Apple’s growth story is heavily reliant on China, and if the Beijing crackdown intensifies, that could pose a big problem to the bunch of other megacap tech companies that rely on China,” said Edward Moya, senior market analyst for the Americas at Oanda.
Apple is unlikely to face a material financial impact from China’s restrictions, according to Evercore ISI’s Amit Daryanani. Government officials were probably already avoiding the company’s products, and it would be hard for the nation to take more substantive action against Apple without affecting jobs in the country — which is where most iPhones are assembled, he wrote.
Tech shares have soared in 2023 amid the artificial-intelligence frenzy and speculation that the Federal Reserve is getting closer to wrapping up its interest-rate hikes. The nearly 40% run-up in the Nasdaq 100 this year suggests that valuations look stretched, according to some metrics, with the industry ripe for a correction.
“We expect market choppiness to persist near term,” said Keith Lerner, co-chief investment officer at Truist Advisory Services. “September, like August, has tended to be a more challenging month, and there remains a dearth of obvious near-term upside catalysts as stocks continue to digest the big year-to-date gains.”
Economy, Fedspeak
Traders also kept a close eye on the latest US economic data, with solid jobless claims figures reinforcing the case for the Fed to keep rates elevated. Applications for US unemployment benefits fell to the lowest level since February.
After climbing in the immediate aftermath of the report, two-year US yields fell below 5%. Treasury futures and the dollar were little changed early on Friday, while yields on Australian and New Zealand government debt fell.
Fed Bank of New York President John Williams said US monetary policy is “in a good place,” but officials will need to parse through data to decide on how to proceed on interest rates. He spoke during a moderated discussion with Bloomberg’s Michael McKee in New York.
Separately on Thursday, Chicago Fed President Austan Goolsbee told the Marketplace radio program: “We are very rapidly approaching the time when our argument is not going to be about how high should the rates go.”
“We’ve seen this movie before,” said Mike Loewengart at Morgan Stanley Global Investment Office. “Yes, the economy has slowed and inflation has cooled, but employment continues to be a thorn in the side of the Fed, which has made softening the jobs market the cornerstone of its inflation battle. The Fed may be poised to leave interest rates unchanged later this month, but they’re nowhere close to backing away from a higher-for-longer stance.”
The euro retreated Thursday as the region barely grew in the second quarter while the onshore yuan slipped to an almost 16-year low as pessimism grew toward China’s economy. Oil declined for a second day on Friday after a nine-session rally propelled futures into overbought territory, while gold was little changed.
Key events this week:
- Japan GDP, Friday
- Germany CPI, Friday
- US wholesale inventories, consumer credit, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 8:34 a.m. Tokyo time. The S&P 500 fell 0.3%
- Nasdaq 100 futures were little changed. The Nasdaq 100 fell 0.7%
- Hang Seng futures fell 1%
- Nikkei 225 futures fell 0.3%
- S&P/ASX 200 futures were little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was unchanged at $1.0696
- The Japanese yen was little changed at 147.29 per dollar
- The offshore yuan was little changed at 7.3398 per dollar
Cryptocurrencies
- Bitcoin rose 0.8% to $26,217.93
- Ether rose 0.5% to $1,646.55
Bonds
- The yield on 10-year Treasuries declined four basis points to 4.24%
- Australia’s 10-year yield declined four basis points to 4.12%
Commodities
- West Texas Intermediate crude fell 0.2% to $86.70 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Rita Nazareth.
