By Jamie McGeever

(Reuters) – A look at the day ahead in Asian markets.

The wave of profit-taking in U.S. Big Tech and AI stocks appears to be gathering momentum, which could depress investor sentiment and risk appetite in Asia on Tuesday even if it is offset by a rotation into cheaper, beaten down sectors.

The Dow’s rise to a one-month high on Monday as the Nasdaq declined for a third day will be well-received, of course. But ahead of U.S. inflation figures on Friday, which is also the last trading day of the quarter, caution may prevail.

Otherwise, the macroeconomic backdrop to the start of the week seems fairly supportive for Asian and emerging markets – Treasury yields edged lower on Monday and the dollar had its biggest fall in nearly two weeks.

Tuesday’s regional economic calendar is light, with the highlights being consumer price inflation from Malaysia, service sector producer prices from Japan, the latest measures of consumer confidence in South Korea and Australia, and trade figures from Hong Kong. 

The market tone across Asia on Tuesday could be set by the tempest brewing in tech. Nvidia shares slumped 6.7% on Monday, bringing their decline in the last three days to 16%, and weighing heavily on semiconductor and tech shares more broadly.

Taiwan’s benchmark index lost nearly 2% on Monday, its biggest fall in two months, and blue chip issue Taiwan Semiconductor Manufacturing Co lost more than 3%. And that was before Nvidia’s slump on Tuesday. 

Hong Kong’s Hang Seng Tech index scraped a two-month low on Monday before recovering most of these losses to end down only 0.6%. Again, the weakness in U.S. tech and semiconductor stocks on Monday – especially the accelerated selloff at the close – doesn’t bode well for the sector in Asia on Tuesday.

Back in the macro world, minutes of the Bank of Japan’s last meeting on Monday showed that Japanese policymakers discussed a near-term interest rate hike, with one calling for an increase “without too much delay” to help get inflation back down.

Currency traders, however, seem unimpressed. The yen appreciated a bit on Monday but only marginally, and it remains within touching distance of the 160 per dollar level that recently pushed Japanese authorities to spend billions of dollars in yen-buying intervention.

The next big inflation number from Japan will be Tokyo consumer price inflation on Friday. This is usually seen as a good barometer of nationwide price pressures, and with the yen so weak and oil prices up 12% in the last three weeks, officials may be getting twitchy.

Annual inflation in Malaysia, meanwhile, is expected to have accelerated slightly to 1.9% in May from 1.8% in April, according to a Reuters poll of economists. 

Here are key developments that could provide more direction to markets on Tuesday:

– Japan services PPI (May)

– Malaysia CPI (May)

– Australia consumer sentiment (June)

(Reporting by Jamie McGeever; Editing by Josie Kao)

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