Asian stocks gain as tech recovery hopes offset U.S.-China tensions

Asian markets opened Tuesday with cautious optimism, clawing back ground after a bruising week for technology stocks and brushing aside fresh U.S.-China friction. The gains were modest but meaningful: Japan's Nikkei rose 0.8%, mainland China's blue-chip index climbed 0.7%, and the broader Asia-Pacific measure outside Japan ticked up 0.4%. European futures pointed higher as well, with both the Euro Stoxx 50 and FTSE signaling a 0.3% lift at the open. The mood suggested investors were willing to look past the immediate headlines and ask whether the tech sector's recent collapse might finally be bottoming out.

That optimism had to work around some real obstacles. President Trump had spent Monday amplifying his rhetoric about decoupling the U.S. and Chinese economies—a threat that, while economically unrealistic, carried enough political weight to rattle traders. The timing was sharp: Trump's comments arrived just as markets were digesting the possibility that the U.S. might blacklist Semiconductor Manufacturing International Corp, China's largest chipmaker. That prospect alone had already hammered Chinese tech companies both on mainland exchanges and in Hong Kong. The newly launched Hang Seng tech index fell 1.1% even as the broader Hang Seng recovered 0.5%. Hong Hao, head of research at BoCom International, captured the lingering unease: the market simply could not absorb this kind of news in a day or two. The decoupling talk would remain a weight on sentiment and a source of risk.

The technology sector's fragility was the real story underneath the day's gains. Nasdaq futures were trading essentially flat after hemorrhaging more than 6% in the previous week. Analysts struggled to identify a single catalyst for the plunge, but the arithmetic was clear enough: the index had surged 75% from its March bottom, and valuations had stretched to the point where a correction looked less like panic and more like arithmetic. Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management, framed it plainly—expensive shares falling was healthy. The question was whether that fall had run its course.

Beyond the tech wreckage lay another uncertainty that was beginning to weigh on traders: the possibility that U.S. policymakers might not deliver the massive stimulus some had been banking on. Friday's jobs report had come in stronger than expected, and that strength was now being read as a potential signal that Congress might feel less urgency to pass trillion-dollar relief packages. Masahiko Loo, portfolio manager at AllianceBernstein, noted the shift in thinking. Better economic data, paradoxically, could mean less government support—and markets had grown accustomed to that support. The 10-year Treasury yield had climbed to 0.710%, moving away from August's five-month low of 0.504%, a sign that traders were repricing their expectations for both growth and policy.

Currency markets reflected the crosscurrents. Sterling took a hit after the European Union warned Britain on Monday that any attempt to override parts of the Brexit Withdrawal Agreement would kill prospects for a trade deal. Prime Minister Boris Johnson's government had reportedly been drafting legislation to do exactly that. The pound fell 0.80% to $1.3167 on Monday and was last trading at $1.3152, near its lowest point in two weeks. The euro eased to $1.1816, while the yen barely budged at 106.21. The dollar's recent weakness had been checked by rising U.S. yields.

Commodity markets told their own story of uncertainty. Gold ticked up 0.2% to $1,933.43 per ounce, held aloft by lingering doubts about the economic recovery from the pandemic but not surging. Oil prices fell harder, dropping to five-week lows as Saudi Arabia announced its deepest monthly price cuts for Asian supply in five months. Chinese demand remained clouded by uncertainty, and U.S. crude futures fell 1.8% to $39.06 per barrel. The picture emerging was one of markets trying to find footing on uneven ground: some sectors and regions finding buyers, others still waiting to see whether the worst had passed, and policymakers' next moves still very much in question.