Tech stocks lead rout in Asia after US inflation fuels rate hike bets

HONG KONG – Asian stocks plunged on Oct 15 as technology firms suffered another painful rout, after forecast-topping US inflation data fuelled expectations that the Federal Reserve will have to ramp interest rates higher.

Seoul and Tokyo again bore the brunt of the offloading as traders bailed out of once-imperious chipmakers, though the selling was heavy across most of the region, tracking sharp losses on Wall Street overnight.

Markets, already struggling with concerns about the outlook for the AI investment boom, were stung after data showed the US consumer price index hit 3.7% in September, sharply up from the previous month and more than the 3.6% forecast.

The reading is the highest in five months and was largely driven by a surge in energy costs caused by the Iran war, with Tehran effectively choking off the Strait of Hormuz, through which a fifth of global crude oil passed.

Petrol costs accounted for more than half of the monthly CPI jump, surging 9.1% in September.

The figures will put pressure on the Fed to hike rates at least once more in 2026, following September’s lift, with the bank’s decision due on Oct 28, a week before the US midterm elections.

Bets on a second successive hike rose after the release. There is now a 37.1% chance officials will announce a 25-basis-point increase in October, according to CME Group’s FedWatch tool. The probability was around 22% before the data.

“This CPI report is a headache for the Fed, which had been indicating a willingness to pause this month,” said Neil Wilson at Saxo Markets, referring to several board members who had suggested they favoured a go-slow approach to assess last month’s lift.

“Markets too had all but priced out a hike later this month but repriced for the Fed to move a bit quicker after US inflation came in a little hotter than expected.”

December lift ‘fully priced’

Pepperstone’s Chris Weston wrote: “Further evidence of right-tail inflation risk in the US has reinforced the higher-for-longer rates narrative, with sellers emerging across risk assets and interest rate-sensitive equities coming under renewed pressure.

“The breadth of price pressures across the CPI basket has been particularly concerning, challenging a market desperately in need of evidence of disinflation.”

He said “a December hike is now effectively fully priced”, adding that there was also a 66% probability of a January lift.

Tech firms – which rely on borrowing to fund their huge AI investments – led the losses on Oct 15, tracking their counterparts in New York.

Seoul’s Kospi briefly dived more than 8% – leading to a brief trading halt – before paring the losses with SK Hynix sinking more than 11% and Samsung more than 9%. The index ended down 7.6% to 5,554.22.

In Tokyo, the Nikkei 225 shed close to 5% as flash memory maker Kioxia also dived more than 12% and chip-testing equipment Advantest plunged 15%. Tech investment titan SoftBank lost 9.3%. The Nikkei average ended down 4.9% at 64,425.95.

Taipei lost more than 3% as market heavyweight TSMC gave up 2%. The chipmaker’s losses came even as it announced a sixth straight month of record quarterly profit fuelled by demand for AI hardware.

The selling came after many tech firms had clawed back some of the huge losses sustained in a summer rout that came on the back of worries about elevated valuations and questions over when firms would see returns on their colossal investments.

Hong Kong, Shanghai, Singapore, Sydney, Bangkok and Jakarta were also deep in negative territory.

However, there were gains in Wellington, Mumbai and Manila, while London, Frankfurt and Paris also advanced in the morning.

US government borrowing costs surged on the news, with 10-year Treasuries hitting fresh 24-year highs, though they later retreated on investor demand owing to their attractive yields above 5.3%.

The US dollar gave back most of the gains sparked by bets on higher interest rates, while the yen was also helped by comments from Japan’s finance minister warning that Tokyo was ready to step in with support. AFP