Most Asian stocks fell on Wednesday, following overnight declines on Wall Street. Investors grew cautious about the path of U.S. interest rates, while technology stocks faced more pressure after weeks of strong gains.
Weak purchasing managers index (PMI) data from Japan and higher-than-expected inflation in Australia also weighed on sentiment.
Chinese markets were the exception, posting small gains on optimism over potential stimulus measures from Beijing. Chinese tech shares also recovered some ground after earlier losses this week.
The broader Asian sell-off came after Federal Reserve Chair Jerome Powell flagged growing economic risks and uncertainty over U.S. interest rates. S&P 500 futures were flat in Asian trade, with focus shifting to key economic reports due later this week.
Japan’s Nikkei dips on weak PMI
Japan’s Nikkei 225 and TOPIX slipped slightly as markets reopened after Tuesday’s holiday.
Data showed manufacturing shrank more than expected in September, while services growth slowed. Overall business activity grew at its weakest pace in four months. The report highlighted persistent struggles in Japanese manufacturing, especially in autos and steel under pressure from U.S. trade tariffs.
Still, Japanese indexes remained close to record highs reached last week, with political uncertainty fueling expectations that rates will stay low.
Australia’s ASX 200 sinks on hot inflation
Australia’s ASX 200 was among the region’s worst performers, dropping 1%. The decline came after inflation data exceeded expectations, reducing hopes for further RBA rate cuts.
Consumer prices rose 3% year-on-year in August, above forecasts of 2.9%. Core inflation, excluding volatile items, stayed well above the RBA’s 2% to 3% target.
Sticky inflation has limited the central bank’s ability to ease further. The RBA has already cut rates by 75 basis points in 2025 but has warned of caution over future moves.
Hong Kong outperforms on Alibaba rally
Hong Kong’s Hang Seng index outperformed, rising 0.9% on strong gains in tech stocks.
Alibaba surged up to 7% after unveiling its most advanced artificial intelligence model and pledging higher AI investment. CEO Eddie Wu said spending will exceed the company’s previously committed $53 billion, with plans to expand AI into areas such as virtual reality and smart driving.
Alibaba’s rally lifted Chinese tech shares, which had already logged strong gains through August and September amid growing confidence in China’s AI sector. Broader Chinese indexes also rose, with the CSI 300 and Shanghai Composite up 0.4% to 0.5%.
Other Asian markets weaken
South Korea’s KOSPI fell 0.6%, dragged down by tech stocks. Samsung Electronics slipped 0.8% and SK Hynix lost 2.2%, despite upbeat results from U.S. rival Micron Technology.
Singapore’s Straits Times dropped 0.2%, while India’s Nifty 50 lost 0.4% amid stalled trade talks with Washington. The Nifty also neared a break below 25,000 points, as investors worried about the economic impact of U.S. tariffs of 50%.
