Asian technology shares tumbled on Tuesday as a broker downgrade of AU Optronics unnerved investors ahead of key U.S. earnings reports, while the dollar rose before testimony by Fed chief Alan Greenspan. Oil rose to stand about 80 cents off a 21-year high of $42.45, while gold was steady around $406 an ounce. Japanese government bonds (JGBs) rose as stocks fell. Tokyo's Nikkei average <.N225> fell 1.8 percent by midday to 11,232.47, dragged lower by techs after figures on Monday on North American orders for equipment used to produce microchips showed weakening demand in June. The Nikkei, which was closed on Monday for a national holiday, hit its lowest intraday level since June 7 during the morning. "The U.S. earnings season was making investors cautious about trading, and then the chip demand news came as a blow to the market," said Kenichi Azuma, equity strategist at Cosmo Securities. MSCI's widest index of shares elsewhere in the Asia Pacific <.MSCIAPJ> dropped 0.8 percent by 0220 GMT, led by a 1.5 percent decline in its tech component <.MSCIAPJIT>. Stock benchmarks fell 0.9 percent to an 11-month low in Taiwan <.TWII>, 1.5 percent in South Korea <.KS11> and around 0.6 percent in Hong Kong <.HSI>, Australia <.AXJO> and Singapore <.STI>.
DOLLAR AWAITS GREENSPAN
Trader's said the dollar's movements would be muted ahead of Greenspan's speech on the economy at 1830 GMT, with investors awaiting clarity on the outlook for interest rates after a string of softer-than-expected data. "The testimony will likely be neutral to slightly hawkish but any boost to the dollar should be short-lived, given that the speech will not alter perceptions of fundamental trends in the U.S. which have depressed the dollar and yields in recent weeks," JP Morgan said in a report. The dollar bought 108.40 yen , up from around 108.25 in late New York trade. The euro was at $1.2430 versus around $1.2444. Merrill Lynch said late on Monday it had downgraded AU Optronics <2409.TW>, the world's third-biggest maker of large liquid crystal displays (LCD), to "sell" from "buy" and turned negative on the whole sector, citing rapidly worsening industry fundamentals. AU's shares slumped 5.2 percent in Taiwan. The news unnerved investors after recent chip sector downgrades by several investment houses and ahead of earnings from Texas Instruments Inc. , Motorola Inc. and Sun Microsystems Inc. later in the day. Lehman Brothers on Monday cut its rating on Texas Instruments to "equal weight" from "overweight", saying the company could see increased pressure on its profit margins. Shares in Advantest Corp. <6857.T>, Japan's top maker of semiconductor testing devices, fell 4.3 percent, while Tokyo Electron Ltd. <8035.T>, the world's second-biggest maker of chip-making equipment, fell 5 percent. Kyocera Corp. <6971.T>, the world's biggest maker of the ceramic casings that house microchips, fell 3.7 percent. Shares in Samsung Electronics Co. Ltd. <005930.KS>, the world's biggest memory chip maker, fell 1.5 percent, while Taiwan Semiconductor Manufacturing Co. <233TW>, the world's largest contract chipmaker, fell 1 percent. The falls in Asian techs also came after Singapore-based Flextronics International Ltd. signalled on Monday its fiscal second-quarter results may be lower than the most optimistic Wall Street forecasts. Shares in U.S.-listed Flextronics, the world's largest contract electronics maker, fell 8 percent in after-hours trade. In U.S. equities trade, the Dow Jones industrial average <.DJI> fell 0.45 percent to its lowest close since May 24. The technology-heavy Nasdaq <.IXIC> inched up 0.04 percent. Japanese government bonds rose, pushing the yield on the benchmark 10-year cash bond <0#JPTSY=JBTC> down one basis point to 1.755 percent. U.S. oil edged up two cents to $41.66 a barrel. Spot gold was steady at $405.80 an ounce.///