SYDNEY - Asian shares fell on Thursday as chipmakers stumbled ahead of results from bellwether TSMC, while bonds benefited from another benign reading on US inflation that lessened the risk of an imminent rate hike.
Oil prices, however, kept climbing as hostilities heated up in the Middle East. Brent crude futures rose 0.6 percent to $85.45 a barrel, adding to this week's gain of 12 percent.
All eyes are on the quarterly earnings from Taiwan Semiconductor Manufacturing Co's (TSMC), the world's largest manufacturer of advanced AI chips. The company is expected to notch a fifth consecutive quarter of record earnings, with a 59 percent surge in net profit for April-June.
However, investors are proving hard to please as shares of ASML, the world's dominant supplier of equipment needed to make high-tech computer chips, finished 0.4 percent lower even after it raised its 2026 sales forecasts and pledged a capacity boost.
"Seeing aggressive pullback in Memory/Hardware," Brian Heavey, an equity trader at JPMorgan, said in a note. "Don't think there's a smoking gun 'negative' headline driving semis/hardware selloff. I think just shows how high the bar is for semis earnings."
The selling spilled over to Asia. MSCI’s broadest index of Asia-Pacific shares outside Japan slid 1.7 percent as South Korea's KOSPI slumped 6.3 percent on weakness from Samsung, down 8 percent, and SK Hynix, down 11 percent. Japan’s Nikkei dropped 3 percent.
South Korea's central bank raised interest rates for the first time in 3-1/2 years to 2.75 percent on Thursday to stabilize a slumping won and counter persistent inflationary pressure. The decision was largely as expected.
Wall Street gained overnight as investors rotated out of semiconductors into Magnificent Seven stocks and banks after robust earnings from major lenders, but Asia is more vulnerable to the chip sell-off given its heavier exposure to semiconductor stocks.
Bonds cheer cool inflation
Surprisingly soft US PPI data for June added to the benign consumer inflation figures a day earlier, as markets now priced out the risk of an imminent rate hike from the US Federal Reserve this month to just 10 percent, from 43 percent earlier in the month.
However, the pullback in inflation is likely only temporary, with oil prices climbing on the renewed Middle East hostilities.
Bond investors, however, focused on cooler inflation data. Two-year Treasury yields edged up 2 basis points to 4.1493 percent, after falling 14 bps over the past two days. Ten-year yields were steady at 4.5593 percent, having been down 7 bps over the past two days.
That pulled the dollar down, except for against the beleaguered yen. The dollar index was steady at 100.48, after falling 0.4 percent overnight to the lowest since June 18. The yen hovered at 162.08, not far from the 40-year low of 162.84 as speculators remain wary of Japanese intervention.
Sterling hit two-month highs on expectations that Andy Burnham, who is likely to be named new Labour Party leader on Friday, will pick a fiscally conservative finance minister. The pound was 0.1 percent higher at $1.3538, after surging 1 percent overnight.
Gold was steady at $4,055 an ounce.
