Asian stocks declined for a second straight session on Wednesday as a record-setting rally in semiconductor shares lost momentum and stronger-than-expected US inflation reinforced bets that the Federal Reserve may have to raise interest rates next year.
The MSCI Asia Pacific Index fell 0.5%, led by South Korea, where the Kospi tumbled 2.8% as investors took profits in chip stocks and concerns mounted over labour unrest at Samsung Electronics. The company's shares dropped as much as 3.9% after wage talks with its union broke down, raising the possibility of a strike.
Japan's Topix bucked the broader weakness to rise 0.4%, while Australia's S&P/ASX 200 fell 0.6%. Hang Seng futures were little changed, pointing to a muted start in Hong Kong.
Chip Rally Loses Steam
The retreat comes after a powerful rebound in global equities, driven largely by enthusiasm around artificial intelligence and robust earnings from megacap technology companies. That rally is now showing signs of fatigue, with a key US semiconductor index dropping 3% overnight and an Asian chip gauge extending losses for a second day.
Investors are increasingly questioning whether semiconductor valuations have run ahead of fundamentals, especially as markets wait to see whether massive AI-related spending translates into sustained profit growth.
Sentiment was also hit by hotter-than-expected US inflation data. Consumer prices rose 3.8% in April from a year earlier, the fastest pace since 2023, while core inflation — which excludes food and energy — increased 2.8%.
The data pushed the two-year US Treasury yield to nearly 4%, while the 30-year yield climbed to 5.03%. Bond yields also rose in Japan and Australia, reflecting expectations that borrowing costs may stay elevated for longer.
Brent Eases, But Oil Remains Elevated
Oil offered only modest relief to investors. Brent crude slipped about 1% to around $106.60 a barrel after a three-day rally, while West Texas Intermediate fell 0.8% to $101.35. Prices remain elevated as the Strait of Hormuz stays effectively closed and progress toward a US-Iran peace agreement remains limited.
US President Donald Trump said he would focus primarily on trade discussions during his meeting this week with Xi Jinping, downplaying the extent to which the Iran conflict would dominate the talks.
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