Kospi and Nikkei sink in chip rout as Wall Street rotates and the Dow gains 1%

• Asia took the heaviest losses. The Kospi closed 7.97% lower at 5,554.22 and the Nikkei 225 fell 4.94% to 64,425.95. The Taiwan Weighted ended 2.84% down, the Shanghai Composite 2.46% down and the Hang Seng 1.16% down.
• Europe held up. The FTSE 100 closed 1.08% higher at 10,840.35, the CAC 40 gained 0.78% and the DAX 0.33%. The more tech-heavy Euro Stoxx 50 slipped 0.36%.
• Wall Street opened weak and then recovered. The Dow finished 1.08% higher at 52,177.69 and the S&P 500 rose 0.33% to 7,744.06. The Nasdaq Composite had been down more than 1% early but ended 0.08% higher at 26,713.03.

The chip sell-off that has hung over markets all week was at its worst in Seoul. Wednesday's US consumer price index put September inflation at 3.7%, above the 3.6% forecast. Petrol drove the jump after disruption in the Strait of Hormuz. The figure revived talk of another Federal Reserve rate rise as soon as the 28 October meeting. That hurt most the companies borrowing heavily to fund AI spending. Samsung and SK Hynix led the losses, and the Kospi briefly fell more than 8%, which triggered a short trading halt.

This morning's US producer price index looked likely to make things worse. Prices businesses receive rose 1.3% in September against 0.6% expected, the biggest monthly rise since March 2022. Treasuries rallied instead. The 10-year yield fell 10.1bp to 5.089% and the 30-year fell 9.6bp. Lower long-term yields reduce how heavily future profits are discounted, which helps rate-sensitive stocks. Homebuilders rallied and the Russell 2000 gained 1.38%. Market pricing of an October rate rise eased to about 27% from 33% a day earlier.

The bond rally looks more like money seeking safety as it leaves crowded tech than a sign that inflation is cooling, because the PPI offered no such comfort. What held up at the close was rotation, not relief: money moved into health care, materials and consumer stocks while technology lagged.

Stock investors are not panicking. The S&P 500 is within 1.3% of its 52-week high, and the VIX eased 0.41 points to 16.46. The bond market is less calm: the MOVE index of Treasury volatility rose 3.46% to 102.49. Gold gained 2.0% to $4,190.10 while the dollar index fell 0.51% to 102.03, so investors sought safety in gold rather than the dollar. US sector funds show the split clearly. Health care rose 1.86%, materials 1.79% and consumer discretionary 1.71%, while technology fell 0.65% and energy 1.58%. Across our Asian universe of 13,697 listings, PrimerIQ counted 10,615 decliners against 1,949 advancers. In the UK, advancers edged ahead, 423 to 381.

September's US PPI came out at 08:30 ET today. Prices rose 1.3% on the month and 6.3% on the year, against forecasts of 0.6% and 5.4%. The core measure, which excludes food and energy, rose 0.7% against 0.3% expected. Energy did most of the work: the energy component jumped 10.8% and accounted for more than 80% of the overall rise. The report follows Wednesday's 3.7% CPI reading. Oil was mixed. Brent is trading 0.23% lower at $105.82 and WTI is up 1.17% at $96.20, after two cargo ships were reported struck in the Strait of Hormuz. With the US session over, the next scheduled event for interest rates is the Fed's decision on 28 October.

Most results beat forecasts, but the market was unforgiving. TSMC topped earnings estimates, yet its US-listed shares slipped. Nordea fell 7.83% in Helsinki despite beating, while Ericsson's A shares rose 9.89% after earnings well ahead of forecasts. After the bell, J.B. Hunt matched earnings forecasts and beat on revenue, but its shares fell on squeezed margins; Interactive Brokers came in exactly in line.