* Japan's Nikkei down 3%, South Korea plunges over 6%
* All eyes on TSMC earnings but bar to please is high
* Bonds benefits from cooler PPI data, little risk of July
Fed hike
By Stella Qiu
SYDNEY, July 16 (Reuters) - Asian shares fell on Thursday as
chipmakers stumbled ahead of results from bellwether TSMC, while
bonds benefited from another benign reading on U.S. inflation
that lessened the risk of an imminent rate hike.
Oil prices, however, kept climbing as hostilities heated up
in the Middle East. Washington continued striking Iran after
reimposing a naval blockade of its ports, while Tehran warned of
an "existential war" with America. Brent crude futures
rose 0.6% to $85.45 a barrel, adding to this week's gain of 12%.
All eyes are on the quarterly earnings from Taiwan
Semiconductor Manufacturing Co's ( TSM ) , the world's
largest manufacturer of advanced AI chips. The company is
expected to notch a fifth consecutive quarter of record
earnings, with a 59% surge in net profit for April-June.
However, investors are proving hard to please as shares of
ASML, the world's dominant supplier of equipment
needed to make high-tech computer chips, finished 0.4% lower
even after it raised its 2026 sales forecasts and pledged a
capacity boost.
"Seeing aggressive pullback in Memory/Hardware," Brian
Heavey, an equity trader at JPMorgan, said in a note. "Don't
think there's a smoking gun 'negative' headline driving
semis/hardware selloff. I think just shows how high the bar is
for semis earnings."
The selling spilled over to Asia. MSCI's broadest index of
Asia-Pacific shares outside Japan slid 1.7% as
South Korea's KOSPI slumped 6.3% on weakness from
Samsung, down 8%, and SK Hynix ( SKHY ), down
11%.
Japan's Nikkei dropped 3%. Taiwanese shares
fell 0.5%, while China's Hang Seng Index gained 1.2%.
South Korea's central bank raised interest rates for the
first time in 3-1/2 years to 2.75% on Thursday to stabilise a
slumping won and counter persistent inflationary pressure. The
decision was largely as expected.
Wall Street gained overnight as investors rotated out of
semiconductors into Magnificent Seven stocks and banks after
robust earnings from major lenders, but Asia is more vulnerable
to the chip sell-off given its heavier exposure to semiconductor
stocks.
BONDS CHEER COOL INFLATION
Surprisingly soft U.S. PPI data for June added to the benign
consumer inflation figures a day earlier, as markets now priced
out the risk of an imminent rate hike from the U.S. Federal
Reserve this month to just 10%, from 43% earlier in the month.
However, the pullback in inflation is likely only temporary,
with oil prices climbing on the renewed Middle East hostilities.
The Wall Street Journal reported President Donald Trump is
leaning towards expanding U.S. military operations in Iran,
including sending ground forces.
Bond investors, however, focused on cooler inflation data.
Two-year Treasury yields edged up 2 basis points to
4.1493%, after falling 14 bps over the past two days. Ten-year
yields were steady at 4.5593%, having been down 7
bps over the past two days.
That pulled the dollar down, except for against the
beleaguered yen. The dollar index was steady at 100.48,
after falling 0.4% overnight to the lowest since June 18. The
yen hovered at 162.08, not far from the 40-year low of
162.84 as speculators remain wary of Japanese intervention.
Sterling hit two-month highs on expectations that Andy
Burnham, who is likely to be named new Labour Party leader on
Friday, will pick a fiscally conservative finance minister. The
pound was 0.1% higher at $1.3538, after surging 1%
overnight.
Gold was steady at $4,055 an ounce.
(Editing by Christian Schmollinger)