San Francisco Frontiers - Tech stock lead rout after US inflation fuels rate hike bets

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

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 percent in September, sharply up from the previous month and more than the 3.6 percent forecast.

The reading is the highest in five months and was largely driven by the surge in energy costs caused by the more than seven-month Iran war, which saw Tehran effectively choke off the Strait of Hormuz, through which a fifth of global crude passed.

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

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

Bets on a second successive hike rose after the release. There is now a 37.1 percent chance officials will announce a 25-basis-point increase this month, according to CME Group's FedWatch tool. The probability was around 22 percent 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 percent probability of a January lift.

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

Seoul's Kospi dived more than seven percent, with SK hynix sinking more than 10 percent and Samsung more than nine percent.

And in Tokyo the Nikkei 225 shed more than four percent as Kioxia also dived more than 10 percent and Advantest plunged 12 percent. Tech investment titan SoftBank lost 9.5 percent.

Taipei lost almost three percent as market-heavyweight TSMC gave up around two percent.

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, Wellington, Manila and Jakarta were also deep in negative territory.

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 percent.

The 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 Tokyo was ready to step in with support.

- Key figures at around 0230 GMT -

Seoul - Kospi: DOWN 7.5 percent at 5,556.08

Tokyo - Nikkei 225: DOWN 4.8 percent at 64,489.06 (break)

Hong Kong - Hang Seng Index: DOWN 1.0 percent at 24,070.31

Shanghai - Composite: DOWN 1.5 percent at 3,712.00

West Texas Intermediate: DOWN 1.2 percent at $93.97 per barrel

Brent North Sea crude: DOWN 1.4 percent at $104.55 per barrel

Euro/dollar: UP at $1.1220 from $1.1147 on Wednesday

Pound/dollar: UP at $1.3244 from $1.3189

Dollar/yen: DOWN at 157.70 yen from 158.37 yen

Euro/pound: UP at 84.72 pence from 84.57 pence

New York - Dow: DOWN 0.1 percent at 51,621.48 (close)

London - FTSE 100: UP 0.7 percent at 10,724.86 (close)

J.Peterson--SFF