MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) lost 0.35%, weighed by a 1.2% fall in Taiwanese shares (.TWII) after TSMC's earnings on Thursday.
TSMC (2330.TW), Asia's biggest firm by market capitalisation outside China, fell almost 4% following its earnings on Thursday. read more
While the world's largest contract chipmaker posted record quarterly sales and forecast higher revenue for the current quarter, investors took profits, fearing its best times could already be behind it.
"Its earnings were excellent and to me, the market seems to be a bit overreacting," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities. "But the fall in its profit margin led to the view that its growth momentum might be peaking out."
TSMC's fall weighed on many other semiconductor related shares in the region, with South Korea's Kospi (.KS11) down 0.6% and Japan's Nikkei (.N225) losing 1.1%.
Weakness in chip-related shares also helped to bring down the S&P 500 (.SPX) 0.33% and the Nasdaq Composite (.IXIC) 0.70% on Thursday.
While those indexes remained near record levels, supported by the prospects of an economic recovery, investors were turning wary on riskier, less liquid assets.
Russell 2000 index of U.S. small cap shares (.RUT) dropped 0.6% to a near two-month low. Once-booming special purpose acquisition companies (SPACs), or "blank check companies", were completely out of favour, with Ipox Spac index (.SPAC) hitting a seven-month low.
Investors instead flocked to bonds, after Federal Reserve Chair Jerome Powell reiterated that rising inflation is likely to be transitory and that the U.S. central bank would continue to support the economy.
Powell on Wednesday pledged "powerful support" to complete the U.S. economic recovery from the coronavirus pandemic, a message he repeated on Thursday. read more
The 10-year U.S. Treasuries yield fell to 1.302% , edging near five-month low of 1.250% touched last week.
The yield on inflation-protected U.S. bonds fell to minus 1.043% , a five-month low.
Bond yields fell even as data earlier this week showed U.S. consumer inflation hitting its highest in 13 years. read more
"Short positions in bonds simply don't work, so much so that you just lose vigour," said Arihiro Nagata, general manager of global investment at Sumitomo Mitsui Bank. "You can't fight the Fed when there is such a massive easing."
In foreign exchange, major currencies were little changed on the day but the dollar headed for its best weekly gain in about a month.
"Delta variants are raging in countries where vaccination is limited. In a way, the dollar and U.S. assets appear to be bought as a hedge against that," said Sumitomo Mitsui's Nagata.
The euro changed hands at $1.1807 while the dollar traded at 110.03 yen .
Gold on the other hand hit a one-month high of $1,834.3 per ounce and last stood at $1,831.3, supported by a dovish Fed.
Oil prices stayed under pressure after a compromise deal between leading OPEC producers and a surprisingly poor weekly reading on U.S. fuel demand.
Reuters reported on Wednesday that Saudi Arabia and the United Arab Emirates had reached an accord that should pave the way for a deal to supply more crude to a tight oil market. read more
A deal has yet to be finalised and the UAE energy ministry said deliberations are continuing.
U.S. crude futures stood at $71.70 per barrel , near last week's low of $70.76. Brent futures traded at $73.54 per barrel . Editing by Sam Holmes