Bloomberg.com — Asian stocks traded lower Tuesday following a tech-led slump on Wall Street overnight though the worst of the losses were pared on hopes for progress in the U.S.-China trade dispute. Treasury yields dropped and the dollar slipped from an 18-month high.
Key indexes slid from Tokyo and Seoul to Sydney, with Apple Inc. suppliers under pressure after the iPhone maker fell 5 percent on signs of a deteriorating sales outlook. Stocks came off their lows on a report that China’s Vice Premier Liu He will visit the U.S. to pave the way for a meeting between the leaders of the two biggest economies later this month, which also supported some currencies.
Hopes of a resumption in trade talks helped Chinese shares swing from declines of more than one percent to gains of a similar magnitude with small-caps boosted by government pledges to support the private sector. Hong Kong stocks erased a slide. S&P 500 Index futures pushed higher and U.K. futures tipped modest gains at the open. Earlier, the Nasdaq 100 Index dropped for a third day and the Russell 2000 small-cap benchmark erased its gains for the year. Oil fell for a record 12th straight day Tuesday.
The latest warning on consumer appetite for electronics came from Lumentum Holdings Inc., an Apple supplier that said a top customer asked to “meaningfully reduce shipments” for previously placed orders. Deteriorating sentiment towards tech has hit the sector that had propelled American stock gains until October. Trade-war worries are also rising, with the White House circulating a draft report on auto tariffs.
In the background is a Federal Reserve that continues on its path of policy normalization. San Francisco Fed President Mary Daly indicated Monday that she isn’t worried about recent declines in stocks. A “broad consensus” had agreed that “valuations were higher than could be supported,” she said. “So then a correction is something that I would view as a positive.” The Fed is forecast to hike interest rates again next month.
“We always talk about that proverbial wall of worry and that wall right now is pretty high,” David Kudla, chief executive officer of Mainstay Capital Management, said on Bloomberg TV. “We have the issues in China with the growth concerns there, we have the issues in Europe with the battle between the Italy and the EU, the U.K. getting ready for Brexit. There is some guidance lower on earnings, and a Federal Reserve that is going to raise rates.”
The Australian and New Zealand dollars climbed on the reports that the U.S. and China are inching closer toward resolving the trade war. China and the U.S. will find a solution to their differences over trade that meets both countries’ common interests, Chinese Premier Li Keqiang said in Singapore Tuesday. The yen, a proxy in times of uncertainty, swung to a loss.
Elsewhere, Britain’s pound pared losses from the past three days as pressure builds on U.K. Prime Minister Theresa May to ditch her Brexit plan. The euro recovered from its weakest against the dollar since June 2017 ahead of more potential stress around Italy’s budget.