Samsung and SK Hynix Slump as Tech Selloff Spreads

Global markets were rattled overnight as a sharp selloff in South Korean semiconductor stocks spread across the tech sector, reviving concerns over stretched valuations in AI-adjacent shares. The move comes just a day ahead of a Federal Reserve rate decision carrying an unusually high degree of uncertainty, and ahead of quarterly results from Microsoft, Meta, Amazon and Apple this week.

Tech stocks broadly, and chip stocks in particular, cracked lower overnight as investors were gripped by a bout of nerves. South Korea's Kospi slumped 10.8%, dragged down by its two largest constituents and semiconductor giants, Samsung Electronics (-13.4%) and SK Hynix (-14.7%). Both stocks are popular with leveraged retail traders who had booked outsized gains on the way up - and there are now signs of panic setting in. SK Hynix has lost 47% of its value since the end of June with no meaningful rebound, while Samsung Electronics is down 38% over the same period.

Elsewhere in the region:

●      Japan's Nikkei fell 4%, weighed down by a 4.4% drop in SoftBank

●      Shanghai Composite lost 1.2%

●      Changxin Technology Group — which surged around 470% on its IPO debut the previous day — gave back 4%, though it remains China's most valuable company by market capitalisation

●      Australia's ASX 200 rose 0.6%

●      Hong Kong's Hang Seng added 0.4%

●      India's Nifty 50 ended broadly unchanged

The South Korean selloff fed through to US chip stocks overnight, though losses steadied as the European session progressed. Investor nervousness remains elevated ahead of hyperscaler earnings from Microsoft, Meta and Amazon on Wednesday and Thursday, with Apple also reporting Thursday.

European indices struggled for direction Monday morning, taking their cues from US stock index futures, which opened deeply in the red following the overnight chip stock rout. Futures rebounded off their lows before semiconductor and AI-adjacent names dipped again. The tech-heavy Nasdaq and S&P 500 bore the brunt of the losses, while the Dow spent much of the morning in positive territory as investors rotated out of tech into less growth-sensitive sectors - helping to limit losses across Europe, where tech exposure is comparatively limited.

ASML, the Dutch supplier of chip manufacturing equipment, fell around 10% overnight, hit not only by the broader chip selloff but also by reports that an unnamed Chinese company is now operating in direct competition with it. Little is known about the sophistication of the Chinese product, but the news follows China's Moonshot and DeepSeek - further reminders to US AI-adjacent firms that competition from China is intensifying, and isn't necessarily friendly.

Source: TN Trader 

The US dollar edged higher Tuesday morning, building on gains made the previous day. The dollar had started the week on the back foot, gapping lower Monday morning after a weekend in which the US military held off further attacks on Iran, raising hopes of a return to peace negotiations. That changed sharply Monday afternoon: AI-adjacent stocks, led by the chip sector and NVIDIA in particular, fell hard, erasing the Nasdaq's early 1.6% gain and pushing it into negative territory. The dollar rallied again on flight-to-safety demand, with the cash Dollar Index now back within sight of the thirteen-month high set four weeks ago, aided by a bounce in US Treasuries as yields eased from recent highs.

Source: TN Trader 

Markets remain focused on tomorrow evening's Federal Reserve policy decision. The central expectation is that rates will be left unchanged, but a 34% probability of a 25 basis point hike - according to the CME FedWatch Tool - means this won't be viewed as a routine meeting. Meanwhile, USD/JPY continues to close in on last Thursday's 40-year high, with the Bank of Japan's own policy meeting later this week potentially complicated further should the yen weaken enough to prompt intervention from Japan's Ministry of Finance.

US stock index futures were sharply lower overnight following the dramatic selloff in Samsung Electronics and SK Hynix. The reversal appears to have begun Monday: futures had jumped higher in early trade as oil slumped on news that the US had halted its near two-week campaign against Iranian targets, before sentiment turned sharply in the afternoon. The S&P 500, up almost 1% in the morning, closed effectively unchanged, while the Nasdaq 100 - up around 1.6% early on - ended the day down 0.2%.

NVIDIA was a key driver of the reversal, falling 5% on the day and down a further 1.2% this morning. The company confirmed over the weekend it is in talks with OpenAI to guarantee $250 billion in financing for a data centre - the latest example of a circular financing model that has investors questioning whether it represents a house of cards. The concern echoes last week's negative reaction to Alphabet's capex increase and accompanying negative quarterly cash flow, and comes ahead of results from Microsoft, Amazon and Meta Platforms this week.

Investors have been cutting exposure to AI-adjacent tech, particularly chips, while rotating into less growth-sensitive parts of the market - a pattern reflected in modest gains for the Dow and Russell 2000 both yesterday and this morning. Sentiment is further weighed down by continued innovation from Chinese firms using domestically designed chips to produce cheaper, open-weight models - an appealing option for companies looking to build their own bespoke AI systems.

Source: TN Trader 

Geopolitical Backdrop: US and Iran Hold Off Further Action

The US and Iran refrained from military action against one another for a second day. Israeli Prime Minister Benjamin Netanyahu is in Washington meeting President Trump to discuss the conflict with Iran. Oil sold off again this morning, with September Brent breaking below $85 per barrel to hit an eleven-day low. Separately, Israeli Defence Minister Israel Katz confirmed that Israel wants to strike Iranian energy infrastructure, but that the US has not approved such action.

Fed Decision Tomorrow Carries Unusual Uncertainty

The Federal Reserve's FOMC announces its policy decision tomorrow evening. The probability of a 25 basis point hike remains around 34%, according to the CME FedWatch Tool — a level of pre-meeting uncertainty not seen in years.

Crude Oil

Crude oil fell again this morning as traders reacted to the continued absence of significant military action between the US and Iran since last Thursday. President Trump maintains that negotiations are progressing and has warned the US is prepared to resume hostilities should talks fail, despite speculation the US may be running short of missiles — something the President dismissed when questioned. On a brighter note, data from Kpler shows shipping traffic through the Bab el-Mandeb strait has risen to a four-day high, though traffic through the Strait of Hormuz remains minimal.

Front-month (September) Brent broke below $85 per barrel this morning, an eleven-day low, having now retraced around 50% of its July rally that peaked last Thursday. The daily MACD has turned downward, pulling back from overbought territory.

Source: TN Trader 

Gold and silver both fell sharply this morning, extending yesterday's selloff. Both metals had gapped higher as markets reopened on Sunday night amid relief over the pause in US-Iran hostilities, but sentiment reversed sharply Monday afternoon as the tech and chip selloff sent investors back into the US dollar as a safe haven, at the expense of dollar-denominated commodities. Having started the week above $4,100, gold was hovering close to $4,000 by lunchtime in London, while silver slumped below $57 per ounce, having topped $60 during Monday's Asian-Pacific session. With the cash Dollar Index closing in on its thirteen-month high, both metals look set to struggle for headway in current conditions.

Source: TN Trader 

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