Updates before European open

By Rae Wee

SINGAPORE, July 17 (Reuters) - A brutal selloff in chipmakers rippled through global markets on Friday, triggering a rout across Asia and setting up steep losses in Europe and the U.S. as investors abruptly reassessed the durability of the artificial intelligence-driven rally.

Investors fled risk across Asia, sending MSCI's broadest index of Asia-Pacific shares outside Japan .MISX00000PUS down 2.7%, while the Nikkei .N225 tumbled more than 5%, leaving it down more than 13% from its recent peak.

Taiwan's stock market .TWII bore the brunt of the selloff, plunging more than 6% for its worst day since U.S. President Donald Trump's "Liberation Day" tariffs, while China's blue-chip index .CSI300 fell 4%.

In Hong Kong, the Hang Seng Index .HSI slid 2.5%, and a 5% drop in the Hang Seng Tech Index .HSTECH also marked its sharpest fall since April 2025.

The selloff came even as Taiwan's TSMC 2330.TW announced second-quarter profit that blew past forecasts and ASML ASML.AS, the world's dominant supplier of equipment needed to make high-tech computer chips, raised its 2026 sales forecasts earlier this week.

"Retail investors have borrowed to trade in this really impressive AI rally, so I think the unwinding of leveraged positions will definitely exaggerate the decline as well. It will feed into the market," said Fabien Yip, a market analyst at IG.

"If tonight, the sell-off continues into the U.S. session, I think Korea, when it reopens, is going to be quite disastrous."

Markets in South Korea were closed on Friday for a holiday, a day after authorities announced they will temporarily ban new listings of exchange-traded funds (ETFs) that are tied to certain major technology firms, while raising minimum required deposits for retail investors to invest in such products, in an effort to curb volatility.

In Europe, EUROSTOXX 50 futures STXEc1 slid 1%. DAX futures FDXc1 were down 0.8% and FTSE futures FFIc1 eased 0.43%.

Nasdaq futures NQc1 slumped 1.6% while S&P 500 futures ESc1 fell 0.85%.

OIL CLIMBS AGAIN

In commodities, oil prices were on the rise, with Brent crude futures LCOc1 up 0.1% at $84.30 a barrel, while U.S. crude CLc1 advanced 0.27% to $79.16 per barrel.

Iran said it launched fresh attacks on U.S. facilities in the Gulf on Friday after a sixth consecutive night of U.S. strikes on Iranian military facilities, as last month's truce descended into daily attacks and counterattacks.

For the week, Brent and U.S. crude futures were set to rise more than 10% each, marking their largest gains since April.

"The U.S. and Iran are further away from seeing eye-to-eye," said Thierry Wizman, global FX and rates strategist at Macquarie.

"The next few days may determine which side has 'overplayed its hand', but not without the risk of seeing some oil infrastructure destroyed in the process."

Trade tensions also returned to the fore, after the U.S. imposed new 25% tariffs on Brazil.

Elsewhere, spot gold XAU= was up 0.5% at $3,990.22 an ounce. GOL/

ASSESSING THE FED RATE PATH

The dollar held steady on Friday and was set to end the week little changed =USD as receding expectations of Federal Reserve rate increases this year were offset by renewed safe-haven demand.

Investors are now pricing in roughly 27 basis points worth of Fed hikes by December 0#USDIRPR, following benign U.S. CPI and PPI readings this week.

The euro EUR= was flat at $1.1442 while sterling GBP= fetched $1.3466.

The yen JPY=, meanwhile, languished near a 40-year low and last stood at 162.39 per dollar, prompting renewed jawboning from Japanese Finance Minister Satsuki Katayama to try and support the currency.