Morning Bidding: Market braces for supply chain aftershocks

Tom Westbrook’s outlook on the day ahead for European and global markets

Taiwan’s strongest earthquake in at least 25 years has also put pressure on global supply chains.

The island accounts for about 90% of chipmaker TSMC’s output, and while its factories are mostly located on the opposite coast from the epicenter, they are filled with fragile equipment that is critical to producing chips for global companies.

TSMC said it had evacuated some manufacturing plants and safety systems were operating normally, while confirming the details of the impact. The quake, which killed four people and collapsed buildings in Hualien County in the east, was also felt in Shanghai and aftershocks were felt in Taipei. all morning.

The severe damage to chip foundries will be felt around the world and underscores the urgency of U.S. President Joe Biden’s strategy to encourage local production to reduce reliance on Taiwanese output.

Shares of TSMC, which accounts for more than 60% of global contract chip manufacturing and has a monopoly on advanced microprocessors, fell 1.4% in early trading.

Shares of Apple supplier Foxconn fell more than 2%, and tablet maker Umeng Optoelectronics fell 1.7%. The broader market also fell as investors awaited a speech by Federal Reserve Chairman Jerome Powell and U.S. services and employment data due later in the day. .

Stronger-than-expected U.S. manufacturing data on Easter Monday appeared to spark a sell-off in the bond market, pushing the benchmark 10-year Treasury yield above major chart resistance, sparking more selling.

In Asian trading on Wednesday, the 10-year Treasury yield held steady at 4.35%. Foreign exchange markets fell into an uneasy calm, with traders wary of testing the mettle of Japanese authorities, who have stepped up warnings of possible intervention.

The yen was steady at 151.55 against the dollar. [FRX/]

European inflation data will also be released later in the session and is expected to cool slightly.

Key developments that could affect the market on Wednesday:

Economy: Eurozone inflation, US non-manufacturing ISM, ADP employment

Speech: Fed Powell

(Reporting by Tom Westbrook; Editing by Jacqueline Wong)

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