Gold has hit a record and bonds have rallied, while chip stocks have tumbled after US presidential candidate Donald Trump sounded lukewarm about his commitment to defending Taiwan.
Subscribe now for unlimited access.
or signup to continue reading
Sterling ticked higher on Wednesday after British inflation held at two per cent year-on-year in June against forecasts for 1.9 per cent, with services inflation stuck at an uncomfortable 5.7 per cent.
Europe's Stoxx share index futures traded 0.2 per cent lower.
S&P 500 futures were also 0.5 per cent lower after the cash index hit a record high in the previous session.
In Taiwan, TSMC fell three per cent, wiping out close to $US30 billion ($A45 billion) from the market value of the world's largest chip maker and a key player in the global supply chain.
The slide came after Trump questioned US support for Taiwan in an interview with Bloomberg Businessweek, saying the closely monitored island should pay for US protection against China.
ASML, the largest equipment supplier to chip makers, reported better-than-expected profit in the second quarter, but its shares dropped as much as 7.7 per cent.
It was unclear exactly what Trump is planning, but his selection of trade hawk JD Vance as his running mate had already put markets on notice that China will figure heavily in his foreign policy thinking.
Chinese stocks were subdued for a second straight day.
The Taiwan dollar slipped slightly to a two-week low.
China's yuan steadied at 7.2673 per dollar as markets waited for news from a leadership meeting in Beijing which ends on Thursday.
"It is more and more clear to me that Trump should be bullish for USD for at least a while," said Brent Donnelly, president at analytics firm Spectra Markets, as he is expected to impose tariffs and run a higher budget deficit.
In Asia, New Zealand shares hit their highest since March 2022 after data showed inflation slowing, though the rates market dipped and the currency rose on sticky domestically driven inflation.
Treasuries held gains that had pushed 10-year US yields to four-month lows overnight after Federal Reserve Chair Jerome Powell said recent cooling in inflation "adds somewhat to confidence" that consumer prices are coming under control.
Fed funds futures have fully priced a US rate cut for September, followed by two more before the end of January 2025.
Ten-year yields were steady at 4.167 per cent and two-year yields hovered at 4.45 per cent, while German Bund yields fell 1 bp to 4.423 per cent.
Lower yields helped propel gold sharply higher and through chart resistance about $US2,450 per ounce despite a broadly firm dollar.
It touched a record $US2,482 overnight.
"Gold's ability to find support in any condition this year is worth highlighting," said Commonwealth Bank of Australia commodity strategist Vivek Dhar.
"While gold prices face uncertainty in coming months, the uncertainty has a positive skew, raising the risk that gold rises above our forecast of $2,500 an ounce by the end of the year."
The Japanese yen strengthened as trading began in Europe on Wednesday, pushing the dollar down 0.75 per cent to 157.08, well off early July's 38-year high of 161.96, after a few rounds of likely intervention from Tokyo authorities late last week.
The euro was steady at $US1.0905.
Oil prices slipped slightly, weighed by signs of weakening demand from China.
Brent crude futures rose 0.4 per cent to $US84.04 barrel and US crude futures gained 0.5 per cent to trade at $US81.12.
Australian Associated Press
