Global stock markets have sharply declined, with intensified sell-offs in technology and semiconductor stocks in the U.S. and Asia, amid fears of persistent U.S. inflation and the possibility of tighter monetary policy, prompting investors to hedge through government bonds and safe havens.
The MSCI Asia-Pacific Index recorded a drop of 2.9%, while South Korea's KOSPI index fell by more than 8%, leading to a 20-minute trading halt, coinciding with a drop of over 9% in the shares of Samsung Electronics and SK Hynix each.
The pressures extended to U.S. markets, as futures for the NASDAQ 100 index fell by 1%, after U.S. inflation data, which recorded its fastest rise in five months, raised fears of a potential rate hike again.
Conversely, U.S. Treasury bonds rose with increased demand for safe assets, and ten-year bond yields fell to 5.10%, while the spot dollar index declined by 0.4%. Gold recovered to about $4,140 per ounce, while Brent crude fell by 1.7% to $104.27 per barrel.
Concerns have increased about valuations of artificial intelligence companies and their ability to generate returns commensurate with the massive investments in the sector, especially after Core Weave's shares dropped by up to 17%, raising questions about funding risks.
Markets are awaiting statements from Federal Reserve Chairman Kevin Warsh, amid expectations of U.S. interest rates rising by about 40 basis points by the end of January, as pressures on equities increase and investor trends towards safe assets strengthen.