Asian stock markets have started on the back foot as a quicker-than-expected increase in US consumer price inflation upped expectations for the Federal Reserve to act later this year.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 1.2 per cent on Thursday, led by a 5.6 per cent plunge in South Korea's KOSPI, while Japan's Nikkei 225 fell 1.3 per cent. S&P 500 e-mini futures were down 0.3 per cent.
"Asia faces another difficult session," said Chris Weston, head of research at Pepperstone Group Ltd in Melbourne.
"KOSPI and Nikkei futures point to renewed technology weakness, with leveraged ETF flows and AI infrastructure credit risk firmly in focus."
Overnight, stocks on Wall Street logged their third day of declines after US consumer price inflation accelerated by more than expected in September.
The S&P 500 fell 1.1 per cent, the Nasdaq Composite tumbled 1.9 per cent and a gauge of semiconductor stocks extended losses into a sixth day, as the prospect of higher interest rates pummelled shares of Oracle, CoreWeave and other AI stocks sensitive to higher borrowing costs.
"While the initial selloff was triggered by the hotter-than-expected CPI, tech was the main driver of today's selloff," JPMorgan analysts wrote in a note. "AI was again the main challenge ... with financing risks and IPO timelines still at the centre of the story."
The CPI data lifted expectations of interest rate hikes from the Federal Reserve over the course of the year ahead, possibly as soon as later this month.
Fed funds futures are now pricing an implied 31.6 per cent probability of a 25-basis-point hike at the US central bank's next two-day meeting on October 28, compared to a 22.1 per cent chance a day earlier, according to the CME Group's FedWatch tool.
The yield on the US 10-year Treasury bond fell 4.4 basis points to 5.144 per cent. Against the yen, the US dollar slid 0.2 per cent to 157.925 yen, while the euro was up 0.3 per cent at $US1.1194.
The Australian dollar declined 0.2 per cent to $US0.6956 after employment unexpectedly decreased by 39,300 jobs in September, against expectations of an increase of 20,000.
Investor attention turns to speeches from Fed officials speaking in Bangkok, including Chair Kevin Warsh, for clues on the US central bank's next move, as well as US producer prices and retail sales data due for release later on Thursday. AI chip giant TSMC will also release earnings for the third quarter later in the Asian trading session.