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Asian shares slumped on Tuesday, with many investors taking profits in the stellar US technology shares after Facebook drew flak for reports over improper access to user data. Fears of stricter regulation linger.

The decline came as investors prepared for the first policy meeting of the Federal Reserve, led by Jerome Powell, the central bank’s new chairman. Concerns over additional protectionist trade measures from US President Donald Trump still loom large.

“US tech indexes, including Nasdaq and Philadelphia semi-conductor index, all hit record highs last week. So they were prone to profit-taking,” said Mutsumi Kagawa, who is the chief strategist at Rakuten Securities.

He added that various uncertainties will cap shares “for now.”

“Once those uncertainties are cleared, investors will shift their focus back to relatively attractive valuations,” Kagawa said.

MSCI’s broadest index of Asia-Pacific shares excluding Tokyo slid 0.4 percent, while Japan’s Nikkei dropped 1.0 percent.

Meanwhile, Wall Street saw S&P 500 lose 1.42 percent. The Nasdaq Composite slipped 1.84 percent. Both suffered the weakest performance in almost five weeks.

“Investors lightened their positions ahead of the Fed’s policy meeting. The markets are completely split on whether the Fed will project three rate hikes this year or four,” said Hiroaki Mino, senior strategist at Mizuho Securities.

Facebook pushed losses farther, plummeting 6.8 percent, as it faced demands from US and European lawmakers to explain how a consultancy managed to gain improper access to the data of over 50 million Facebook users. The consultancy has reportedly worked on President Donald Trump’s election campaign.

Additionally, the Trump government is set to reveal as much as $60 billion in new tariffs on Chinese import on Friday. The tariffs are anticipated to target technology, telecommunications, and intellectual property, according to two officials familiar with the matter.

Large US companies have tried to persuade the US president not to impose the planned massive tariffs on goods imported from China, the world’s second largest economy.

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Other Figures

The steep fall in share prices put a lid on long-term US bond yields. Short-dated yields climbed ahead of a rate hike from the US Federal Reserve, which will start its two-day policy meeting on Tuesday.

The 10-year Treasury yields were little moved at 2.857 percent. It was ten basis points lower than the four-year high of 2.957 percent, which was hit a month ago.

The yield on two-year notes reached 2.32 percent on Monday, a 9 1/2 –year high. The Fed appears braced for a hike in its interest rate policy, with many expecting the rates to reach 1.50-1.75 percent from the 1.25-1.50 percent current rate.

However, even if the Fed rate rise has already been priced in, the US dollar only gained a little from the prospect.

The euro managed to garner more attention as reports emerged stating that the European Central Bank officials were changing their debate from bond purchases to the projected path of interest rates.

The euro climbed $1.2345 and recovered from $1.2258 reached on the previous day.

The British pound touched a one-month high of $1.4088 following the agreement between Britain and the European Union over a 21-month post-Brexit transition period, along with a potential solution to avoid a “hard border” for Northern Ireland.

The yen was only slightly changed at 106.01 per dollar, with traders anxious about any new developments in a political scandal that diminished support for Japanese Prime Minister Shinzo Abe.

 

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