Also weighing on the market was lacklustre earnings from French luxury giant LVMH that showed demand in China for luxury goods worsened, denting some of the enthusiasm around China spurred by stimulus measures.
Tech-heavy South Korean stocks fell 0.6%, while chip stocks led Japan’s Nikkei 1.8% lower. Taiwan stocks slipped 1.2%. That left MSCI’s broadest index of Asia-Pacific shares outside Japan down 0.32%.
Matt Simpson, senior market analyst at City Index, said investors are likely questioning how exposed to risk they really want to be, given there are risk events and a US election looming on Nov 5.
“I expect investors to become increasingly twitchy as we head towards Nov 5, and keen that book profits at frothy levels.”
ASML, whose customers include AI chipmaker TSMC, logic chip makers Intel and Samsung as well as memory chip specialists Micron and SK Hynix, forecast lower than expected 2025 sales.
The Dutch chip equipment maker said despite a boom in AI-related chips, other parts of the semiconductor market are weaker for longer than expected, leading to customer cautiousness.
“The ASML numbers were not good and suggest that all is not well in semiconductor chips outside of AI,” said Nick Ferres, CIO at Vantage Point Asset Management in Singapore.
A Bloomberg News report that US officials have been considering implementing a cap on export licences for AI chips to specific countries also weighed on sentiment.
The dour mood meant Chinese stocks fell in early trading as investors awaited concrete details on stimulus plans. The blue-chip CSI300 fell 0.6%, while Hong Kong’s Hang Seng Index was 0.7% lower in early trading.
Investor focus is now on Thursday when China will hold a press conference to discuss promoting the “steady and healthy” development of the property sector.
“We believe investors should view the policy announcements since Sept 24 as an integrated plan rather than isolated messages – the policy pivot looks very much here to stay,” HSBC strategist Steven Sun said in a report.
Rising dollar
On the macro side, investors remain enthralled by US rates and the shifting rate cut expectations in the wake of data that has shown the US economy to be resilient and inflation to tick just a bit higher.
That has kept traders on the fence of how deep the rate cuts will be in the near term, with traders pricing in 46 basis points (bps) of easing this year. The Fed started its easing cycle with an aggressive 50 bp cut in September.
Markets are ascribing a 96% chance of a 25 bp cut from the Fed next month, CME FedWatch tool showed, compared to a 50% chance a month earlier when investors were weighing towards another 50 bp cut from the U.S. central bank.
The dollar as a result has surged in recent weeks, with the US dollar index , which measures the US unit versus major rivals, at 103.24, hovering near its highest levels since early August.
The euro loitered around two month lows and last fetched US$1.0887 in early trading ahead of the European Central Bank’s policy meeting on Thursday, where the central bank is largely expected to cut rates again.
The yen was steady at 149.155 per dollar but is down 3.6% in October as the dovish tilt from the Bank of Japan drags the currency.
In commodities, oil prices were steady after steep declines in the previous session as investors contended with uncertainty around tensions in the Middle East and what it means for global supply.
Brent crude oil futures rose 0.4% to US$74.56 a barrel. US West Texas Intermediate crude futures rose 0.5% to US$70.93 per barrel.