Asian markets fell sharply on Friday, mirroring overnight losses on Wall Street as investors grew increasingly cautious about a potential technology bubble and uncertainty over the U.S. Federal Reserve’s upcoming interest rate decision. The downturn came after several Fed officials signaled reluctance to cut rates in December, citing persistent inflation risks despite earlier expectations of further easing.
Major indexes across the region traded in negative territory. Tokyo’s Nikkei 225 dropped 1.7% to 50,434.54, Hong Kong’s Hang Seng Index fell 1%, and Seoul’s Kospi tumbled more than 2%. Shanghai, Sydney, Singapore, and Wellington markets also ended lower, erasing most of the week’s earlier gains. The selloff followed a broad decline in U.S. equities on Thursday, where the tech-heavy Nasdaq slid more than 2%, while both the Dow Jones and S&P 500 fell 1.7%.
Investor confidence weakened after comments from several regional Fed presidents, who warned that cutting rates too soon could reignite inflation. St. Louis Fed President Alberto Musalem said policymakers should act with “caution,” while Minneapolis Fed chief Neel Kashkari highlighted “underlying resilience in economic activity.” Cleveland’s Beth Hammack added that interest rates remain “barely restrictive” and must stay elevated to bring inflation closer to target.
Markets are now pricing in a 52% chance of a 25-basis-point rate cut at the Fed’s December 10 meeting, down from 60% the previous day, according to data from Pepperstone. The cautious shift added to growing fears that valuations in the AI and technology sectors have overheated after this year’s massive rally. Analysts say heavy profit-taking and repositioning ahead of Nvidia’s earnings next week could keep volatility high.
Asian tech stocks led Friday’s losses as investors moved to lock in gains. The recent surge in AI-related shares has drawn comparisons to the dot-com era, with analysts warning that profits from artificial intelligence investments may take longer to materialize. Traders also turned defensive after a record U.S. government shutdown ended, bringing focus back to the central bank’s monetary path and upcoming economic data on inflation and jobs.
Meanwhile, oil prices rebounded strongly, recovering from earlier losses this week. Brent crude rose 2.4% to $64.49 per barrel, while West Texas Intermediate (WTI) gained 2.7% to $60.27, following a report from the International Energy Agency (IEA) warning that recent U.S. sanctions on Russia’s top oil producers could significantly disrupt global supplies. The agency said the restrictions could have “the most far-reaching impact yet on global oil markets,” supporting a short-term price rally.
In currency markets, the dollar strengthened slightly, with the yen trading at 154.55, while the euro slipped to $1.1632 and the pound fell to $1.3142. Analysts say the combination of high rates, strong dollar demand, and weak equity sentiment could pressure Asian markets further in the near term.
