Asian stock markets faced downward pressure on Tuesday, with a notable cooling in the technology sector following an eight-day rally. South Korean markets triggered circuit breakers, while prospects for US-Iran negotiations provided some support for market sentiment.
Former US President Donald Trump stated on June 22 that negotiations with Iran were moving towards a "fair and reasonable agreement," but also warned that necessary action would be taken if Iran did not comply. This news buoyed sentiment, with oil prices falling nearly 3% on Monday, partially easing market concerns over geopolitical risks.
Simultaneously, downward pressure on US tech giants spread to Asia. S&P 500 index futures edged lower, and a key Asian tech stock sub-index retreated after eight consecutive days of gains. South Korea's benchmark KOSPI index saw its losses widen to 4% at one point, prompting exchanges to activate circuit breakers for the KOSDAQ and KOSPI 200 futures markets, halting program trading for five minutes.
Technology Sector Leads Declines, South Korea Hit Hardest
South Korean equities bore the brunt of the sell-off.
The Seoul Composite Index saw its early-session losses rapidly expand from 0.3% at the open to 4%. SK Hynix Inc. fell over 5%, while Samsung Electronics Co., Ltd. dropped more than 4%.
This movement was closely tied to a pullback in Wall Street technology stocks, where Alphabet Inc. led declines among large-cap US tech names. The S&P 500 index fell 0.4% on Monday.
Continued weakness in SpaceX also weighed on tech sector sentiment. The company's shares plunged 16% on Monday, with a three-day decline erasing hundreds of billions of dollars in market value.
The catalyst for this decline was SpaceX's announcement of plans to issue investment-grade bonds, with markets anticipating this would initiate a large-scale funding cycle.
Japanese stock declines were relatively moderate. The Nikkei 225 index ended the morning session down about 0.9%, while the Topix index fell approximately 0.8%, showing a significantly smaller overall correction compared to the South Korean market.
Despite the market pressure, fundamental economic data from Japan showed positive signals.
Japan's preliminary June Manufacturing PMI rose to 54.9, up from the previous 54.5. The preliminary Services PMI increased from 50.0 to 51.8. The preliminary Composite PMI came in at 52.5, a clear improvement from the previous 51.1, indicating a strengthening expansion momentum in the Japanese economy.
Concurrently, Japanese Finance Minister Shunichi Suzuki revealed he held a nearly one-hour call with US Treasury Secretary Janet Yellen on Monday. Both sides reaffirmed their agreement on foreign exchange matters and stated that US and Japan are "increasingly aligned" on foreign exchange policy.
The call also covered the Strait of Hormuz and the Iran situation. The USD/JPY exchange rate remains near its lowest level since 1986.
Trump's statements on social media attempted to craft a narrative that the US holds an overwhelmingly dominant position in the negotiations. He emphasized that everyone knows Iran will agree to "major weapons inspections" as a prerequisite for ensuring future "nuclear honesty." Previously, Trump had stated multiple times that US-Iran talks had entered a "final stage" and claimed Iran had agreed to never possess nuclear weapons.
However, Heather Conley, a non-resident senior fellow at the American Enterprise Institute (AEI), directly countered this narrative. She pointed out that, based on the actual details of the agreement, Iran has not made any substantive concessions regarding its core nuclear program.
US crude oil stabilized during the Asian morning session. After falling nearly 3% on Monday, it saw a slight rebound of 0.3% on Tuesday, holding steady around $74.
Spot gold weakened, falling nearly 0.9% on the day and erasing all of its overnight gains.
Spot silver also declined, dropping 2.4% on the day and falling below the $64 mark.
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