Asian stocks drop from record as tech rally cools, investors monitor US-Iran talks

ASIAN stocks declined as a rally in technology shares faltered while investors awaited further developments in US-Iran talks.

MSCI’s gauge of regional equities fell 1.1 per cent after closing at a record high on Monday (Jun 22). A sub-gauge of tech stocks dropped after an eight-day winning run.

S&P 500 futures also retreated after a slide in megacap tech stocks and rising bond yields dragged the US benchmark down 0.4 per cent Monday. SpaceX shares slipped for a third straight day, shedding hundreds of billions of dollars in value.

Brent crude was little changed to trade below US$78 a barrel after falling more than 3 per cent on Monday, when both Washington and Teheran cited progress in the first round of discussions towards a lasting peace agreement.

The US issued a 60-day licence allowing Iran to sell oil on the international market, giving it an economic lifeline, but some discrepancies have emerged – Vice-President JD Vance said Iran agreed to allow nuclear inspectors into the country, a claim disputed by Teheran.

“The weakness in (megacap) tech overnight is putting pressure on market sentiment,” said Fabien Yip, a market analyst at online brokerage IG International.

“While the US-Iran peace deal continues to make progress, there are still fundamental differences on how both countries interpret the terms.”

SpaceX plunged 16 per cent on Monday after saying it’s selling investment-grade bonds in what’s expected to be a massive borrowing spree. Its bond sale is the latest in a wave of deals from companies driving the AI boom.

Attention is shifting to memory chipmaker Micron Technology’s quarterly results on Wednesday, which will be a critical test of whether AI spending can sustain its own rally – the shares are up more than 300 per cent this year – as well as the run-up across tech.

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S&P 500, Nasdaq close lower, dragged by Alphabet and megacap tech; focus on Iran

The AI trade has been a key pillar for global equity markets this year, helping a gauge of world stocks overcome challenges posed by the Middle East conflict to notch successive record highs, most recently on Jun 2.

Expectations that a peace deal will be reached, as well as solid corporate earnings, have fuelled a 14 per cent advance in the S&P 500 Index this quarter.

However, that trails a 26 per cent surge in the MSCI Asia Pacific Index. Benchmarks in Taiwan, South Korea and Japan’s Nikkei 225 have each soared at least 40 per cent.

While geopolitical developments are likely to remain a key source of volatility in the near term, shifts in investor confidence regarding the durability of the AI rally may also lead to bouts of market swings, according to Ulrike Hoffmann-Burchardi at UBS Chief Investment Office.

Meanwhile, Treasuries fell on Monday as trading resumed following a US public holiday, even as oil prices turned lower.

Strategists cited Federal Reserve Chairman Kevin Warsh’s hawkish messaging last week as one of the reasons for the selling pressure. On Jun 17, Warsh kicked off his tenure with an ambitious reform plan to reshape how the US central bank conducts and communicates monetary policy, while leaving interest rates unchanged.

Bond traders are looking to this week’s personal spending data in the US for an early read on whether the market’s newly hawkish stance is warranted.

“Iran talks shifting to lower-level technical discussions is keeping some uncertainty alive, but the real swing factor this week remains core PCE on Thursday,” said Billy Leung, an investment strategist at Global X Management in Sydney.

In currency markets, the Japanese yen lingered near its lowest level since 1986 as investors weighed the prospects for a lasting US-Iran peace deal and the risk of intervention by Japanese authorities. The Bloomberg Dollar Spot Index was little changed after rising 0.2 per cent on Monday.

Elsewhere, Andy Burnham appears set to become the UK’s seventh prime minister in a decade after Keir Starmer laid out a timeline for his own departure and potential rivals backed a quick transition to the popular Manchester politician.

While markets showed little reaction to the resignation, they were buoyed by reduced odds of a leadership contest that could have prolonged uncertainty.

Among the main market moves, Japan’s Topix fell 1.1 per cent, Australia’s S&P/ASX 200 was little changed and Hong Kong’s Hang Seng retreated 1.1 per cent.