Asian stock markets start the week with two speeds. Tokyo and Seoul are racing, driven by purchases of semiconductor manufacturers, while Hong Kong and Shanghai remain weaker. In the background, oil close to 97 dollars and the return of expectations of an increase in American rates weigh heavily.
The picture leaves Europe with conflicting indications. On the one hand, the power of technology and artificial intelligence supports risk appetite. On the other hand, the increase in crude oil and bond yields can penalize the most indebted or high energy consumption sectors.
What also makes the day special is the closure of Wall Street for Labor Day. The European markets will therefore not receive new signals from the American indices and will have to move, above all, on the basis of the last US session, Asia and energy prices.
Wall Street falls despite chip rally
US indices closed lower on Friday following the release of the August jobs report. The US economy created 162 thousand jobs, a result significantly higher than expected, while unemployment remained at 4.1%.
The numbers confirmed the solidity of the American economy, but also increased the possibility that the Federal Reserve will raise rates again. The Dow Jones lost 0.51%, the S&P 500 lost 0.38% and the Nasdaq lost 0.29%.
The technology has, however, shown greater staying power. The Philadelphia semiconductor index gained more than 3%, becoming the main strength of the session.
The contrast is important: robust economic growth supports corporate profits, but can push the central bank to keep monetary policy more restrictive. In fact, higher rates reduce the current value of future profits and can weigh, above all, on the shares of technology companies with very high valuations.
Tokyo and Seoul are flying with semiconductors
The positive signal from American chips has transferred to Asian markets. Tokyo’s Nikkei gained about 2%, while South Korea’s Kospi rose more than 3%.
In Seoul, Samsung Electronics rose more than 4%, while SK Hynix advanced more than 6%. Investors continue to focus on the growth in demand for memories, processors and infrastructure necessary for the development of artificial intelligence.
The rise does not, however, involve all of Asia. Hong Kong’s Hang Seng lost about 1%, while Shanghai remained just below parity. The Chinese market continues to be affected by doubts about domestic growth and the greater caution of international investors.
The division between the price lists indicates that we are not faced with a generalized increase in risk appetite. The purchases are concentrated, above all, on the technology sector and on the companies most exposed to demand for semiconductors.
Because the Asian rally also affects Europe
The first signal for European stock markets concerns technology. Growth in Asian chip stocks may support interest in the entire semiconductor supply chain, including manufacturers, component suppliers and companies that make industrial machinery.
However, this is not an automatic process. The performance of European prices will also depend on the valuations achieved, earnings prospects and movements in bond yields.
The second signal concerns interest rates. The US jobs report has strengthened expectations of a tougher Federal Reserve. If Treasury yields continue to rise, the pressure could transfer to the European bond market as well.
Attention also shifts to the European Central Bank meeting on 9 and 10 September. The official ECB calendar includes the monetary policy decision and the subsequent press conference on Thursday.
Oil close to 97 dollars, the risk coming from the Gulf
The main counterweight to the chip rally is oil. Brent remains around $97 a barrel, after rising by almost 8% in the previous week. The American WTI has exceeded 92 dollars.
Prices are affected by new clashes between the United States and Iran and by fears over the movement of oil tankers in the Strait of Hormuz. According to the International Energy Agency, this passage represents one of the most important routes in the world for the transport of oil and liquefied natural gas.
A prolonged reduction in flows could further increase the price of crude oil. Oil is among the raw materials most sensitive to geopolitical conflicts, because much of the production and exports are concentrated in a limited number of areas.
For Europe, more expensive oil means higher costs for transport, industry and logistics. It can also slow down the decline in inflation and make the ECB’s decisions more difficult.
The three signals to follow today
The first is the endurance of the technological rally. If purchases remain concentrated on semiconductors, the movement will have a predominantly sectoral nature and will not necessarily indicate an improvement in the entire market.
The second is the trend in American yields. A new rise could reduce the positive effect coming from chips and increase investor caution.
The third is oil. Stably exceeding 100 dollars would represent a more worrying sign for inflation and growth. An easing of tensions in the Gulf could instead rapidly reduce the risk premium incorporated into prices.
The input reaching Europe is therefore mixed: artificial intelligence continues to support technology, but oil and rates remind us that the cost of money and energy remains the real obstacle for the markets
