Asia markets falter as hot US inflation, shaky Iran ceasefire weigh

SINGAPORE: Stocks started the Asian session on the ​back foot on Wednesday, with talks between Washington and Tehran at a standstill as hotter-than-expected U.S. inflation underscored the growing economic ‌toll of the Middle East conflict.

MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.6%, down for a second day as Korean shares fell as much as 3.2% before rebounding. The Korean market has been on a tear in recent weeks, breaching records regularly on an AI-led rally that some traders say was ripe ​for a pullback.

Japan's Nikkei 225 was down 0.2%, while S&P 500 e-mini futures nudged 0.1% lower.

"A hotter-than-expected inflation report and persistent geopolitical ​tensions reminded investors that sticky prices and elevated energy costs are not going away anytime soon," said ⁠Tony Sycamore, market analyst at IG in Sydney.

The conflict in the Middle East remained in a stalemate, as U.S. President Donald Trump said on ​Tuesday he does not think he will need China's help to end the war with Iran, ahead of his meeting with Chinese President Xi ​Jinping later this week.

"We’ve seen this movie before, and we know it doesn’t end with a breakthrough agreement that resets the U.S.-China relationship," said Phillip Wool, chief research officer and head of portfolio management at Rayliant Investment Research.

"That creates a pretty low bar for success: As long as Trump and Xi can get ​along and the trade détente continues, that should be enough to count this meeting as a win for both sides."

Brent crude slipped 0.6% ​to $107.13. Oil prices have held at or above $100 a barrel since late February, when U.S. and Israeli strikes on Iran and Tehran's effective closure of ‌the Strait ⁠of Hormuz rattled supply.

In Seoul, Samsung Electronics shares plunged 5.7% after the electronics behemoth failed to reach a pay deal with its South Korean labour union on Wednesday, setting the stage for more than 50,000 workers to go ahead with a full strike that threatens to disrupt production of AI and other chips.

Stocks on Wall Street fell overnight, with the S&P 500 0.2% lower and the Nasdaq Composite down 0.7% after U.S. consumer ​inflation increased by the most in ​three years in April, raising ⁠the risk the Federal Reserve will be forced to raise rates earlier than expected.

Markets have largely priced out any chance of a rate cut from the Fed this year, while expectations for a hike of ​at least 25 basis points at the December meeting have risen to over 35% from below ​22% earlier in the ⁠week, according to CME's FedWatch Tool.

The yield on the U.S. 10-year Treasury bond was unchanged at 4.469%, the highest level since July.

The U.S. dollar index , which measures the greenback's strength against a basket of six major peers, held steady at 98.322, marking its third consecutive day of gains.

Against the yen , the ⁠dollar traded ​0.1% firmer at 157.77 after the Japanese currency briefly spiked Tuesday on "rate check" speculation, often ​seen as a precursor to intervention.

Markets are on edge for any action by Tokyo after sources said authorities had intervened in the past two weeks to arrest the yen's ​decline.

Elsewhere, gold was up 0.1% at $4,718.4805, while bitcoin was 0.2% lower at $80,508.37 and ether slid 0.4% to $2,275.36.