After an uncertain start to the week on Monday, Wall Street tumbled on Tuesday, with the tech-rich Nasdaq down more than 2 per cent and the S&P 500 off more than 1 per cent.
US software firm Palantir slumped 8 per cent despite reporting a 63 per cent surge in revenues and profits.
Asia took up the baton in the morning, with Seoul and Tokyo the hardest hit, having just hit record highs.
Seoul tanked 6 per cent at one point, as chip giants Samsung and SK hynix each lost around 7 per cent.
“I view today’s decline as a correction to cool off an overheated market – a phase of adjustment,” Chung Hae-chang, analyst at Daishin Securities, told AFP.
“The recent rally was extremely steep, so this is the counterbalance.”
He also warned Seoul’s Kospi index could decline 5 per cent further and that “SK hynix and Samsung may also see corrections proportional to their earlier gains”.
Tokyo dived more than 4 per cent as tech investment giant SoftBank shed 14 per cent and Sony more than 2 per cent.
Nintendo, however, briefly jumped more than 10 per cent a day after the gaming firm hiked forecasts for its Switch 2 console and annual profits.
“SEA OF RED”
Taipei was off more than 2 per cent as market heavyweight and chipmaker TSMC gave up 3 per cent.
There were also big losses in Hong Kong, Shanghai, Singapore, Sydney, Wellington, Manila and Jakarta.
“It’s a sea of red across broad markets, and one that offers a gloomy and damp portrayal of risk,” said Chris Weston at Pepperstone.
“In the lead-up to the session, traders had been rotating out of the lower-quality end of the market and into the higher-quality plays, and this dynamic resulted in poor breadth within the US equity indices.”
He said that dynamic had changed and traders were “cutting back on their winners and locking in performance, with the Magnificent Seven (leading tech stocks) basket and AI plays driving equity risk lower”.
And Mike Gitlin, president and chief executive officer of Capital Group, said that while earnings are strong, “what’s challenging are valuations”, according to Bloomberg.
His comments came at a financial summit organised by the Hong Kong Monetary Authority on Tuesday, where other business leaders, including Morgan Stanley boss Ted Pick and Goldman Sachs’ David Solomon, warned of a big correction.
Meanwhile, Saxo Markets’ Charu Chanana said two questions were echoing across portfolios.
“Those who’ve ridden the rally from early 2023 are sitting on substantial gains and wondering if it’s time to lock in profits (and) those still on the sidelines are feeling the pull of (fear of missing out, questioning if they’ve missed the best entry point.
“Both are fair concerns. The AI boom has pushed the ‘Magnificent’ names to new highs, but under the surface, their stories have begun to diverge between companies monetising AI today and those still investing for tomorrow.”
The uncertainty across markets was also felt in the crypto universe, where bitcoin briefly fell below US$100,000 for the first time since June, a month after topping out at a record high above US$126,000.
Source: CNA
