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(Reuters) – TOKYO, July 16 (Reuters) – Despite record profits, profit-taking at Taiwanese semiconductor giant TSMC dragged on other tech businesses and broader risk sentiment on Friday, while a more dovish U.S. rate outlook maintained bond yields near multi-month lows. After TSMC’s earnings on Thursday, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 0.35 percent, driven down by a 1.2 percent drop in Taiwanese shares (.TWII). Following its earnings on Thursday, TSMC (2330.TW), Asia’s largest company by market capitalization outside of China, plummeted about 4%. find out more Despite the fact that the world’s largest contract chipmaker reported record quarterly revenues and predicted stronger revenue for the current quarter, investors grabbed profits, thinking the company’s greatest days were behind it. “I think the market is overreacting,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities. “However, a drop in its profit margin led to the conclusion that its growth impetus had peaked.” The drop in TSMC dragged on many other semiconductor-related stocks in the area, with the Kospi (.KS11) in South Korea down 0.6 percent and the Nikkei (.N225) in Japan down 1.1 percent. On Thursday, weakness in chip-related stocks contributed to a 0.33 percent drop in the S&P 500 (.SPX) and a 0.70 percent drop in the Nasdaq Composite (.IXIC). Investors were becoming wary of riskier, less liquid assets while those indexes stayed at record highs, bolstered by the possibility of an economic recovery. The Russell 2000 index of small-cap stocks in the United States (.RUT) fell 0.6 percent to a two-month low. Special purpose acquisition firms (SPACs), also known as “blank check corporations,” had fallen out of favor, with the Ipox Spac index (.SPAC) hitting a seven-month low. After Federal Reserve Chair Jerome Powell reiterated that rising inflation is likely to be transitory and that the US central bank will continue to support the economy, investors flocked to bonds. Powell offered “strong support” on Wednesday to help the United States continue its economic recovery from the coronavirus outbreak, a message he echoed on Thursday. find out more The yield on a 10-year Treasury note fell to 1.302 percent, creeping closer to a five-month low of 1.250 percent hit last week. The yield on inflation-protected US bonds plummeted to a five-month low of minus 1.043 percent. Bond yields decreased despite data earlier this week showing that consumer inflation in the United States had reached its highest level in 13 years. find out more “Short positions in bonds simply don’t work, to the point where you lose enthusiasm,” said Arihiro Nagata, general manager of Sumitomo Mitsui Bank’s global investment division. “You can’t fight the Fed when they’re easing so much.” Major currencies were barely moved on the day in foreign exchange, but the dollar was heading for its greatest weekly gain in about a month. “In countries where immunization is limited, delta variants are rampant. In some ways, it appears like the dollar and US assets are being purchased as a hedge against this “Nagata of Sumitomo Mitsui agreed. The euro was worth $1.1807, while the dollar was worth 110.03 JPY. Gold, on the other hand, touched a one-month high of $1,834.3 per ounce and was last trading at $1,831.3, helped by the Fed’s dovish stance. After a compromise agreement between key OPEC producers and a surprise low weekly data on US fuel demand, oil prices remained under pressure. Saudi Arabia and the United Arab Emirates, according to Reuters, have achieved an agreement that should clear the way for a contract to deliver extra petroleum to a tight oil market. find out more The deal has yet to be finalized, and the UAE’s energy minister has stated that discussions are still ongoing. Crude futures in the United States were trading at $71.70 a barrel, close to last week’s low of $70.76. Brent futures are currently trading at $73.54 a barrel. Sam Holmes did the editing. The Thomson Reuters Trust Principles are our standards./nRead More

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