US inflation above expectations hits Asian tech, Kospi down 8%

A new wave of selling has hit artificial intelligence-related tech stocks in Asia, pushing South Korea’s Kospi down 8% and Japan’s Nikkei down 5%. This is reported by Il Sole 24 Ore, which links the drop to the new US inflation data released in recent hours.

The US consumer price index for September recorded a 0.6% monthly increase and a 3.7% annual increase, higher than the 3.6% expected by analysts; the core component stood at 2.6% annually, according to Bureau of Labor Statistics data reported by Borse.it. A figure higher than forecasts prompted markets to revise upward their expectations for the Federal Reserve’s next restrictive moves.

According to Il Sole 24 Ore, the prevailing view among operators is that “inflation is biting” and that rates will remain high for longer than expected; the euro, in this context, is holding above 1.12 dollars. The energy front is also complicating the picture: crude oil rose again after new attacks announced by the Houthis, amid geopolitical tensions adding to pressure on rates.

The combination of above-expectations inflation and tensions on oil is therefore hitting particularly hard the stocks most exposed to the artificial intelligence growth narrative, which in recent weeks had supported much of the gains on Asian stock markets. The double-digit percentage drop approached by the Kospi signals how sensitive the sector remains to any sign of revision in expectations about US rates.

It remains to be seen whether the Asian correction will also spread to European and US markets in the coming sessions, at a time when the market must simultaneously digest inflation data higher than expected and a rising oil price for geopolitical reasons distinct from purely macroeconomic ones.