Asia-Pacific stocks tumble as Kospi slides 7%

Summary:

• Technology and semiconductor shares drove steep declines across Asian markets. South Korea's Kospi dropped roughly 7% to under 6,000, its weakest level since July 31, and the Nikkei, ChiNext, CSI 300 and Shanghai Composite all moved lower.
• A plan to lift Saudi pipeline crude export capacity to 10 million bpd is under review, with the kingdom's energy minister saying a gas line conversion could contribute 1.2 million bpd in seven to eight weeks. Oil drifted slightly lower.
• Treasury yields retreated, giving gold a lift and leaving the dollar a bit weaker. The yen strengthened as Japanese wholesale inflation held at an elevated 6.8%, keeping a Bank of Japan rate increase on the horizon.
• Reserve Bank of Australia minutes repeated a hawkish stance, pointing to inflation dangers from capacity limits, the Iran conflict and the AI surge; the NAB survey meanwhile showed soft conditions and strong price pressures.
• Fed's Hammack voiced her view that rates still need to go higher; BoE's Greene cautioned that delaying until second-round inflation effects show up would be too late.
• Strategists at JPMorgan think third-quarter earnings will underpin stocks as the US reporting period begins. BOJ Governor Kazuo Ueda is scheduled to appear before parliament from 04:00 GMT (00:00 ET).

Asian stocks

Heavy selling hit Asian trading floors on Tuesday, with tech and chip names at the forefront of the slide following an overnight retreat in US semiconductor shares. The Kospi, which is heavily reliant on chipmakers, stretched its drop to around 7% and went under 6,000, a trough not seen since July 31. Earlier, Japan's Nikkei traded 2.6% lower; China's tech-focused ChiNext shed 3%, the CSI 300 gave back 1.3% and the Shanghai Composite eased 1.2%.

The downturn pointed to deepening worries about how long the AI-led advance can last, plus concerns that higher crude prices tied to the Middle East situation could prolong inflation and elevated bond yields, pressuring high-priced growth equities.

Oil markets

Crude prices moved a little lower. Saudi Arabia is reviewing a proposal to raise pipeline crude export capacity to 10 million barrels a day; Energy Minister Prince Abdulaziz bin Salman said switching a gas pipeline over to crude could generate an extra 1.2 million bpd in seven to eight weeks. Such a move would widen the kingdom's Red Sea export route, letting it avoid the troubled Strait of Hormuz.

Separately, UKMTO counts show Iranian forces were reported to have struck 6 commercial vessels in and around the Strait of Hormuz on Sunday alone. That 6-ship total is the largest one-day count since the start of the conflict.

Yields, currencies and gold

Treasury yields slipped a touch, underpinning gold and leaving the dollar slightly weaker. The yen gained ground too, aided by producer price figures from Japan. Wholesale prices in Japan were up 6.8% year on year in September, short of the 7.6% forecast yet still high as firms shifted fuel and chemical expenses along. Import prices in yen terms surged close to 25%, leaving a Bank of Japan rate move in the near term on the table. Governor Kazuo Ueda is set to appear before parliament at 04:00 GMT (00:00 ET).

Australia

The Reserve Bank of Australia's September meeting, when the cash rate was lifted to 4.60%, produced minutes that restated the board's hawkish stance. Officials flagged inflation threats from stretched local capacity, the Iran conflict and the worldwide AI boom, adding that more rate increases would come if necessary. For September, the NAB business survey revealed fragile conditions, with employment and orders down while price pressures ran strong. Business confidence dropped to -13.

Central bank voices

Cleveland Fed President Beth Hammack said rates, in her view, must go higher to cool demand that is being stoked by AI investment and spending driven by wealth. She also said she would enter the 27 to 28 October meeting without a fixed view on when the next hike would come. Across the Atlantic, Bank of England policymaker Megan Greene described monetary policy as not very restrictive and said holding off until second-round inflation effects emerge would mean the bank moves too late. She sees the bigger danger as not acting ahead of time, not tightening prematurely.

Reporting season ahead

Attention shifts this week to a packed US corporate earnings calendar. JPMorgan strategists said they see third-quarter numbers as supportive for equities, with profit growth extending past the AI sector. They also contended that S&P 500 estimates appear more sensible on closer inspection, and their lead indicator signals at least two positive reporting seasons ahead.