Asian markets sell off as AI trades crumble after hot US CPI data
Asia-Pacific equities fell on Thursday after a stronger-than-expected US consumer price inflation reading raised expectations that the Federal Reserve could tighten policy later this year, pressuring technology and artificial intelligence-linked shares.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 1.2%, led by a 5.6% fall in South Korea's KOSPI, while Japan's Nikkei 225 dropped 1.3%. S&P 500 e-mini futures were down 0.3%. Chris Weston, head of research at Pepperstone Group in Melbourne, said Asia faced "another difficult session", pointing to renewed technology weakness with leveraged ETF flows and AI infrastructure credit risk in focus.
The moves followed a third straight day of declines on Wall Street, where the S&P 500 fell 1.1% and the Nasdaq Composite dropped 1.9% after US consumer price inflation accelerated by more than expected in September. A gauge of semiconductor stocks extended losses into a sixth session, with Oracle, CoreWeave and other AI names sensitive to borrowing costs among the fallers. JPMorgan analysts wrote that while the initial selloff was triggered by the CPI surprise, technology was the main driver, with AI financing risks and IPO timelines still central to the story.
Fed funds futures priced an implied 31.6% probability of a 25-basis-point hike at the central bank's October 28 meeting, up from 22.1% a day earlier, according to CME Group's FedWatch tool. The yield on the US 10-year Treasury bond fell 4.4 basis points to 5.144%. The dollar slipped 0.2% against the yen to 157.925 yen, while the euro rose 0.3% to $1.1194. The Australian dollar fell 0.2% to $0.6956 after employment unexpectedly declined by 39,300 jobs in September against expectations of a 20,000 increase.
Investors are watching speeches from Fed officials in Bangkok, including Chair Kevin Warsh, for signals on the central bank's next move, along with US producer prices and retail sales data due later on Thursday. AI chipmaker TSMC is also scheduled to report third-quarter earnings during the Asian trading session.
