Global stock markets broadly declined on Wednesday, weighed down by escalating US-Iran military tensions and persistent inflation concerns. Investors adopted a cautious stance ahead of key US inflation data, driving a flight to safety.
In Europe, the UK's FTSE 100 index had already fallen 1.4% on Tuesday and was projected to open lower again on Wednesday. Asian markets were similarly pressured, with the MSCI Asia Pacific ex Japan Index dropping around 3%, Japan's Nikkei 225 falling 2%, and South Korea's Kospi index plunging 7%. Technology stocks were particularly hard hit, with Japan's SoftBank Group, South Korea's Samsung Electronics, and SK Hynix all facing sell-offs, with SK Hynix down over 8%.
Market anxiety stems from a renewed escalation in US-Iran military confrontations. On Tuesday evening, Iran's Revolutionary Guards launched attacks on a US base in Jordan and 21 targets in the Gulf region, in retaliation for prior US strikes on Iranian air defense and radar facilities near the Strait of Hormuz. The conflict was ignited after a US Army Apache helicopter was shot down over the Strait of Hormuz. A ceasefire agreement reached in April is now under severe strain, casting a shadow over prospects for peace talks.
The geopolitical conflict has continued to push international oil prices higher. Brent crude traded near $91.44 per barrel in early Wednesday trading, extending gains from the previous session. Persistently elevated energy prices have heightened market fears of a resurgence in inflation.
Market attention is also focused on the US Consumer Price Index (CPI) data for May, scheduled for release at 8:30 PM Beijing Time tonight. Economists forecast the headline annual CPI rate will rise from 3.8% to 4.2%, marking the first time it has breached the 4% level since May 2023. Analysts warn that a stronger-than-expected reading could trigger a rise in bond yields and further declines in equity markets.
Additionally, recent valuation pressures in the artificial intelligence sector have added to the tech sector's woes. Analysts note that with major AI players like SpaceX, Anthropic, and OpenAI preparing for public listings, some investors are adjusting their portfolios to make room for these significant upcoming IPOs.
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