Asia shares edge up as chip selloff eases; US CPI awaited

On Wednesday, Asian shares experienced a slight increase as companies involved in artificial intelligence recovered from a recent sell-off, although gains were tempered by high oil prices and uncertainty surrounding upcoming U.S. inflation data. Among AI-related firms in South Korea, Samsung Electronics and SK Hynix both rose by more than 2 percent, while Kioxia in Japan remained stable, recovering some of the previous day's losses.

The MSCI's Asia-Pacific index outside Japan gained 0.5 percent, following a mild decline in U.S. stocks the previous day.

Despite the rise in Asian markets, caution remained present due to elevated oil prices and concerns over energy supplies, which had intensified following Houthi missile and drone attacks on Saudi Arabia. Oil prices climbed 0.8 percent, reaching $94.96 a barrel for U.S. crude and $106.6 for Brent crude. The situation was further complicated by geopolitical tensions and their impact on energy markets, with analyst Kyle Rodda at Capital.com noting that these factors would not aid market sentiment.

Investors displayed risk-averse behavior by shifting towards longer-dated bonds as a safe haven. The yield on 10-year Treasury notes stayed steady at 5.221 percent after previously hitting its lowest level in nearly two weeks, while the yield on 30-year notes maintained 5.569 percent following a three-day decline. Overnight in Wall Street, U.S. bank stocks declined after mixed quarterly earnings from Citigroup and other banks, affecting broader market performance. U.S. stock futures, the S&P 500 e-minis, were up 0.04 percent at 7,858.8.

Market participants were eagerly anticipating the U.S. Consumer Price Index (CPI) data, which would provide insights into the Federal Reserve's interest-rate outlook. Economists forecast that headline inflation would accelerate to an annual 3.6 percent in September due to rising energy prices, with the core CPI rising 0.2 percent on a monthly basis.

However, there was a risk of a core CPI surprise to the upside due to strong consumer demand and higher costs, potentially pushing up market pricing for an October Federal Reserve rate hike and increasing the value of the U.S. dollar. Currency strategist Carol Kong at Commonwealth Bank of Australia estimated a 22 percent chance of an October rate hike before the CPI data, as reflected by the CME FedWatch Tool.

New York Federal Reserve President John Williams suggested that the Federal Reserve may need to raise its policy rate once more this year to curb inflation, but he saw no immediate need for hikes in 2027.

The dollar index, which measures the greenback against currencies of major trading partners, declined to 102.17, while the euro remained unchanged at $1.1202. Market participants were also eagerly awaiting Chinese inflation data, seeking indications of a resurgence in domestic demand amid deflationary pressures.