Asian Markets Slide as AI Optimism Fades and Fed Rate Fears Return

The regional downturn was particularly pronounced in South Korea, where the Kospi index tumbled 7.8% as investors abandoned chipmakers. Samsung Electronics shares fell 9.4%, while SK Hynix plunged 11%. Japan’s Nikkei Stock Average lost 4.4%, and markets in Shanghai and Hong Kong followed the downward trend, shedding 1.5% and 1.0% respectively.

This volatility follows a turbulent session on Wall Street, where the S&P 500 and Nasdaq recorded their largest single-day losses since July. Markets are reacting to a higher-than-expected September U.S. core consumer-price index, which suggests broad inflationary pressures. James Reilly of Capital Economics noted that traders now assign a 50-50 probability to a 25-basis-point rate increase next month, though he maintains that the Fed may hold off until December.

While equity markets faced heavy selling, government bond yields retreated as capital sought safer ground. The 10-year Japanese government bond yield dropped 6.7 basis points to 2.933%. Meanwhile, oil prices also softened, with West Texas Intermediate falling 1.0% to $94.18 a barrel, as analysts at the Commonwealth Bank of Australia pointed to increased supply flows from the Middle East that helped buffer inventory concerns.