Tech stocks led Asian share markets lower on Thursday as fears on the outlook for the sector overshadowed positive corporate news, while the dollar held gains after Fed chief Alan Greenspan repeated upbeat economic comments. Gold was steady around $396 an ounce after falling to a two-week low of $394.40 on Wednesday. Oil slipped to just under $41 a barrel, while Japanese bonds fell as the market braced for second-quarter economic growth figures, due in August. Most Asian stock indexes tracked falls in the Nasdaq to a nine-month closing low after a rally in tech shares on Wednesday proved short-lived. Investors refocused on a series of recent chip downgrades, despite strong earnings from key U.S. companies.
Japan's Nikkei stock average <.N225> had fallen 1.6 percent by midday to 11,256.41, after jumping 1.6 percent on Wednesday. Shares dropped 1.3 percent in Taiwan <.TWII> and 1.8 percent in South Korea <.KS11>. "Pessimism surrounding tech shares is growing stronger among global investors, as most people believe their prices have peaked," said Kim Hak-kyun, an analyst at Goodmorning-Shinhan Securities Co in South Korea. MSCI's broadest index of Asia Pacific shares outside Japan <.MSCIAPJ> had fallen 1.1 percent by 0230 GMT. Its tech component <.MSCIAPJIT> dropped 2.5 percent after jumping about 3 percent on Wednesday. Greenspan stuck to his upbeat tone in his second day of testimony to Congress, saying the pace of growth was sustainable this year and next, with no apparent threat to price stability. A survey taken after Greenspan spoke showed all 22 primary dealers polled expected a quarter point rise in the 1.25 percent Fed funds rate at the next policy meeting in August. A majority also expected the Fed to raise rates by a similar amount at its September meeting. More now see rates rising at each of the four meetings left this year, taking interest rates to 2.25 percent at year's end.
GREENSPAN IMPACT
"Greenspan has clearly spelled out that ... the risk is for a faster-than-expected tightening cycle and markets have, at the very least, been forced to square up short (U.S. dollar) positions," said Geoff Bowmer, divisional director of foreign exchange at Macquarie Bank. "The risk is that the increases are faster, rather than slower, any time that a sign of inflation rears its ugly head." The dollar bought around 109.65 yen , little changed from late U.S. levels and not far from a one-month high around 110.30 yen hit on Wednesday. The euro was at $1.22560 , also little changed and off a near-three-week low of $1.2211 hit on Wednesday. The Thai baht fell to a 10-month low around 41.08 per dollar and the Taiwan dollar weakened past 34 per dollar to its lowest since late 2003. The Australian dollar tumbled 0.5 percent to 71.15 U.S. cents, extending Wednesday's 1.7 percent loss. Asian tech shares dropped despite wireless technology provider Qualcomm Inc. posting a more than doubling in profit and raising its financial forecast after the U.S. market closed. Its shares rose 0.5 percent in after-hours trade. Qualcomm's report came a day after Texas Instruments , the world's largest maker of chips for cell phones, posted record revenue in its wireless business but said growth would moderate in the second half of the year. Sharp Corp. <6753.T>, the world's biggest maker of LCD televisions, tumbled 2.3 percent after a newspaper reported shipment prices of LCD panels were falling for the first time in about a year and a half. Samsung Electronics, the world's largest memory-chip maker, which also makes LCD panels, dropped 3.4 percent in South Korea.
AU Optronics <2409.TW>, the world's third-largest maker of computer display screens, slid 3.1 percent ahead of its earnings later in the day. Tokyo Electron <8035.T>, the world's second-biggest producer of chip-making equipment, fell 2 percent. The declines followed a 2.2 percent fall in the tech-heavy Nasdaq <.IXIC> to its lowest close since October 2003. The Dow Jones industrial average <.DJI> fell 1 percent to its lowest close since May 24. Japanese government bond prices fell, pushing the yield on the benchmark 10-year cash bond <0#JPTSY=JBTC> up 1.5 basis points to 1.790 percent. U.S. oil slipped three cents to $40.55. Spot gold stood around $396.25 an ounce, versus $396.70 in New York.///