SYDNEY, Feb 25 (Reuters) – Asian shares experienced a decline on Tuesday due to concerns over U.S. investment restrictions on China. The rise in the euro also faded as investors awaited Germany’s resolution on forming a new government without significant surprises.
Gold reached a record high amid tariff concerns. Investors remained cautious ahead of Nvidia’s results, with options indicating an 8% share price fluctuation should there be any surprises. MSCI’s broadest index of Asia-Pacific shares outside Japan fell by 1.3%. Japan’s Nikkei dropped 0.9% upon returning from a public holiday, although shares of its major trading houses surged due to interest from Warren Buffett.
The Bank of Korea cut interest rates by a quarter-point as expected, helping South Korean shares reduce some losses. Hong Kong’s Hang Seng index plunged 2.3%, continuing Monday’s decline after U.S. President Donald Trump signed an order restricting Chinese investments in strategic sectors. Chinese blue chips fell 0.9%.
Alibaba, which had driven the Hong Kong index to three-year highs, plummeted 7.8% following a 10% drop in its U.S.-listed shares overnight.
“The key aspect will then be how China/Asia-based traders act after the initial weakness on the cash equity open, and whether further sellers kick in feeling the momentum move is firmly over,” said Chris Weston, head of research at Pepperstone. “By way of event risk, there is little in the way of data to trouble those trading intraday through Asia, and cross-asset moves will be driven by portfolio flows in reaction to Trump’s directive and how China AI plays fare.”
Trump’s indication that proposed levies on Mexico and Canada were still set to start next week also weighed on sentiment.
On Wall Street, technology shares fell overnight. Apple countered the trend by announcing a $500 billion U.S. investment plan over the next four years.
The broad stock pullback heightened anticipation for Nvidia’s results on Wednesday, with investors seeking rapid revenue growth and questioning spending justification after China’s DeepSeek impacted the industry.
Nasdaq futures and S&P 500 futures were flat in Asia. Weak U.S. data eroded market confidence in the U.S. economy, affecting the U.S. dollar.
Investors foresee the Federal Reserve cutting rates by 50 basis points this year. Bonds rallied, with Treasury yields hitting two-month lows.
In currency markets, the euro’s rise faded, returning to its weekly starting point. The U.S. dollar rebounded from its 2-1/2-month low.
Friedrich Merz is set to become Germany’s next chancellor after his party won the national election.
Oil prices were slightly higher on Tuesday. Brent crude rose 0.2%, and U.S. crude increased 0.3%. Gold was down 0.2%, having hit a record high on Monday.
— news from Reuters