(Bloomberg) — Tech stocks fell broadly and S&P 500 futures fell 1% on concerns that U.S. politicians are taking a tougher stance on China and Taiwan.
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Shares of Nvidia, Advanced Micro Devices and Broadcom fell more than 3% in premarket trading. ASML Holdings AG of the Netherlands fell 7.5%, its biggest drop since 2022, despite reporting strong second-quarter orders. The dollar weakened and 10-year Treasury yields rose.
The Biden administration is considering imposing the toughest trade restrictions if companies like ASML continue to give China access to advanced semiconductor technology, Bloomberg News reported Wednesday. Meanwhile, an anti-China stance has also become a top priority for Republican candidate Donald Trump. In an interview with Bloomberg Businessweek, the former president questioned whether the U.S. has an obligation to defend Taiwan, a major semiconductor manufacturing hub.
“Whether the Democrats win or the Republicans win, there’s always going to be negative pressure on China,” John Taylor, director of global multisector strategy at AllianceBernstein, said in an interview on Bloomberg TV. “One is more bold, the other is more covert, but the result is essentially the same.”
The move in stocks marks a modest pullback after a spectacular rally buoyed by softening inflation readings and optimism that the Federal Reserve will cut interest rates. The S&P 500 closed at another all-time high on Tuesday, and in just five days the Russell 2000 has risen nearly 12%, hitting its most overbought level since 2017.
“We’ve been a little bit overweight,” said Tim Graff, head of macro strategy for EMEA at State Street Global Markets Inc. “Investors are underweight small caps and significantly overweight large caps, so they’re rotating out a little bit.”
In currency markets, the pound rose above $1.30 as stronger-than-expected inflation readings led traders to scale back expectations of an interest rate cut in August, and the yen rose 1 percent against the dollar, reducing the need for Japanese authorities to intervene again in the market.
In the interview, Trump also said a strong dollar was hurting the competitiveness of U.S. exports, pointing to weakness in the yen and the yuan, fueling speculation among strategists that he may pursue a policy of weakening the dollar if he takes office.
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“The concern for Chinese, Japanese and other Asian currencies is that they’re going to be subject to tariffs,” Mark McCormick, global head of currency and emerging markets strategy at TD Bank, said in an interview on Bloomberg TV. “These currencies should get stronger.”
Investors also sifted through earnings reports. Adidas AG rose 5 percent after raising its annual profit target for the second time in three months, and Roche Holding AG jumped on promising early results from a weight-loss drug.
Major events this week:
Eurozone Consumer Price Index, Wednesday
US housing starts, industrial production Wednesday
Fed Beige Book, Wednesday
Fed President Thomas Barkin to speak Wednesday
ECB interest rate decision Thursday
US Initial Jobless Claims, Philadelphia Fed Manufacturing Index, Conference Board LEI, Thursday
Federal Reserve Board members Mary Daly, Laurie Logan and Michelle Bowman to speak Thursday
Fed’s John Williams and Raphael Bostic to speak on Friday
Some of the key market developments:
stock
S&P 500 futures were down 1% as of 7:27 a.m. New York time.
Nasdaq 100 futures fell 1.5%
Dow Jones Industrial Average futures fell 0.3%.
The Stoxx Europe 600 index fell 0.8%
The MSCI World Index was little changed
currency
The Bloomberg Dollar Spot Index fell 0.3%.
The euro rose 0.4% to $1.0941.
The British pound rose 0.5% to $1.3040.
The Japanese yen rose 1.1% to 156.59 yen to the dollar.
Cryptocurrency
Bitcoin rose 0.5% to $65,023.44.
Ether rose 0.8% to $3,466.42.
Bonds
The yield on the 10-year Treasury note rose 1 basis point to 4.17%.
German 10-year government bond yields were little changed at 2.43%.
UK 10-year government bond yields rose 3 basis points to 4.08%.
merchandise
This story was produced with assistance from Bloomberg Automation.
–With assistance from Richard Henderson, Winnie Shue and Naomi Tajitsu.
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