Asia Shares Drop on Tech Jitters and Oil Price Decline, Market Awaits Key US Moves
Market Overview and Key Developments
By Rae Wee
SINGAPORE, Aug 25 (Reuters) - Asia shares slipped on Tuesday while oil prices extended losses, after threats from the U.S. for an "economic D-Day" of sanctions on Iran turned out to be a damp squib.
U.S. Treasury yields were off their recent highs following a report that the Treasury Department might tap into its cash account to finance increased debt buybacks, which could reduce the need for additional sales of short-term bills. [US/]
Tech Sector in Focus
The tech sector is holding its breath for Nvidia's results on Wednesday; investors are aware how hard it will be for the chipmaker to meet lofty expectations.
Nvidia Earnings Expectations
Analysts are generally looking for quarterly revenue to almost double to around $92 billion, with full-year earnings guidance seen in a range of $103 billion to $105 billion.
"Those are really high expectations to be met," said Fabien Yip, a market analyst at IG.
"Judging from Nvidia's track record, it won't be surprising if they meet the headline numbers, but I think the more piece is people are trying to understand whether there are concerns on the circular deals powering its growth and whether that growth percentage is sustainable in the upcoming quarters."
Regional Market Performance
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.5%, while Japan's Nikkei lost 0.9% and South Korea's Kospi slid 2.7%.
Also weighing on tech sentiment was Alibaba's launch of a $10.2 billion share sale at a steep discount to fund its AI ambitions as well as disappointment over Samsung Electronics' shareholder-return plan.
Nasdaq futures were off 0.08% while S&P 500 futures were flat. EUROSTOXX 50 futures edged 0.05% lower.
Sanctions and Oil Market Dynamics
US-Iran Sanctions Impact
SANCTIONS AND BUYBACKS
On Monday, the Trump administration warned countries to cut their business ties with Iran or face secondary sanctions as part of what it billed as an "economic D-Day," though the Treasury Department stopped short of imposing any penalties.
Oil Price Movements
Oil prices fell in the wake of the announcement and were little changed on Tuesday, with Brent crude futures down 0.1% to $92.08 a barrel. U.S. crude edged 0.1% higher to $85.09 per barrel; both measures fell more than 2% overnight.
"We do not expect China - Iran's largest trade partner - to bow to U.S. pressure to cease commerce with Iran," said Joseph Capurso, a strategist at the Commonwealth Bank of Australia.
"The U.S.' campaign against Iran puts at risk the trade truce between the U.S. and China ahead of the leaders meeting next month."
Currency and Trade Implications
Still, the threat of being cut off from the dollar-based financial system stoked rumours that some countries and banks might need to buy dollars in anticipation, lending support to the greenback.
The U.S. dollar extended gains against its Canadian counterpart and last stood at C$1.3844 after a rise of more than 0.5% overnight.
On Monday, U.S. President Donald Trump threatened to raise U.S. tariffs on all cars, trucks and automotive parts from Canada to 50% starting on January 1, escalating a trade fight after negotiations collapsed last week.
The euro strayed from a three-month high and last bought $1.1668, while sterling added 0.06% to $1.3638.
Looking Ahead: US Federal Reserve and Market Sentiment
Jackson Hole Symposium Expectations
Market participants will be focused on Federal Reserve Chair Kevin Warsh's speech in Jackson Hole, Wyoming, on Friday, where investors are hoping for some clarity on the outlook for U.S. interest rates.
"Fiscal uncertainty is unlikely to fade soon ... there is scope, though, for the Warsh-led Fed to ease some monetary policy uncertainty by clarifying its reaction function - specifically, how long it is willing to keep rates on hold to see inflation return to its 2% target," Standard Chartered analysts said.
"All eyes will be on Chair Warsh's Jackson Hole speech for a signal, if not forward guidance."
Gold Prices
Spot gold was up 0.5% at $4,675.51 an ounce. [GOL/]
(Reporting by Rae Wee; Editing by Thomas Derpinghaus)