Financial Analyst/Content Writer, RADEX MARKETS
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
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Financial markets are grappling with a major selloff in semiconductor stocks which has caused major drawdowns in the US and Asian tech sectors. Jitters began on Monday after Alphabet (GOOG) lost 5% and the newly launched SpaceX (SPCX) continued to erase its post-IPO ascent by falling over 16%. The momentum carried over into Asian stock markets the following day, resulting in major losses in Japan and South Korea alike. Samsung and Hynix, which together make up around half of the broad Korean index, both lost the better part of 13% yesterday, causing the Kospi to hit circuit breakers and close the session 10% in the red. The Nikkei 225 also fell sharply, losing 3.5% from record highs as tech investment firm Softbank shed 10%. The fear spread into the American session later in the day, with Nvidia (NVDA) losing 4%, Broadcom (AVGO) falling 3% and Oracle (ORCL) giving 5.7% back to the market. Micron (MU), which is set to publish its latest earnings after market close later today, collapsed 13% yesterday as aggressive profit-taking took hold.
Too early to tell if the tech rout will persist into the latter half of the week, but the Nikkei 225 is once again in the red this morning after losing 1.6%, while over in Taiwan, semiconductor giant TSMC tumbled 3% within hours of the opening bell. For all the headlines, it is worth bearing in mind that the semiconductor scene has exploded in value in recent years and that the current blip has done little to dent the several-hundred percent gains observed in multiple different companies.
While by no means the sole contributor to the downfall in tech stocks, the continued strength of the US dollar is certainly not helping matters. The DXY gained another 0.4% yesterday, submerging the euro under the $1.14 mark and pulling the common currency down to a 12-month low against the greenback. The dollar currency index briefly tapped 100.5 earlier this morning, to the further detriment of major currencies. The yen is now closer to 162 than 161 and traders are looking for any signs of intervention from the Bank of Japan. The Korean won has been sitting above 1,500 for almost a month now, and although monetary authorities have stated that the situation is being monitored, no defensive measures have been observed as of yet. The New Zealand dollar and Swiss franc are both at yearly lows against the US dollar, and while the British pound has escaped the same fate for now, it has done so by the skin of its teeth.
The world is struggling to contend with the prospect of future rate hikes on the dollar and what such adjustments could mean for asset prices. Earlier this week, Bank of America changed its outlook for the rest of the year, predicting no fewer than three rate hikes between now and December, after having previously forecast none. The sudden shift shines light on the fact that markets were not prepared for any kind of monetary tightening any time soon, in fact quite the opposite.
The implications are being felt in currencies but also in precious metals and cryptocurrencies. Gold and silver are once again toying with price ranges not seen since late last year while Bitcoin is struggling to stay above $62,000 per coin – a target first reached back in April 2021. The downturn in digital currencies is particularly egregious because unlike gold, silver or stocks, crypto never established new highs in the first place. A number of risk assets may well have sold off recently, but they did so coming off very strong runs; cryptocurrencies on the other hand did not enjoy the same rallies, making the current slide even more painful for investors. The Clarity Act is still in murky waters, and while both sides of the debate remain at the negotiation table, optimism surrounding the legislation dissipates with each passing day.
About the Author
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
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