Asian markets sell off as AI trades crumble after hot US CPI data

Asian markets experienced a sell-off on Thursday as concerns about rising US consumer price inflation and the potential for further interest rate hikes weighed on stocks. The MSCI's broadest index of Asia-Pacific shares outside Japan dropped 1.2%, with South Korea's KOSPI suffering a 5.6% plunge, while the Nikkei 225 fell 1.3%. S&P 500 e-mini futures declined by 0.3%.

Analysts noted that AI infrastructure credit risk and leveraged ETF flows were major concerns, as stocks on Wall Street logged their third consecutive day of declines following unexpectedly high US CPI data in September. The S&P 500 fell 1.1%, the Nasdaq Composite dropped 1.9%, and semiconductor stocks extended losses for a sixth day, as higher borrowing costs negatively impacted AI stocks.

JPMorgan analysts attributed the market's downturn primarily to tech sector challenges, with financing risks and IPO timelines remaining key issues. The US Federal Reserve's expectation of escalating interest rates by the end of the year, as indicated by Fed funds futures, further fueled the market's downward pressure. The US dollar weakened against the yen and euro, while Australia's dollar fell due to unexpected job losses in September, prompting investors to keep a close eye on upcoming speeches from Federal Reserve officials, including Chair Kevin Warsh, as well as US producer prices and retail sales data.

TSMC, an AI chip giant, was set to release its third-quarter earnings later in the Asian trading session.