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

SINGAPORE – Asian stocks opened lower on Wednesday as talks between Washington and Tehran remained at a standstill, while hotter-than-expected U.S. inflation highlighted the growing economic impact of the Middle East conflict.

MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) slipped 0.6%, marking a second consecutive day of losses. Korean shares (.KS11) fell as much as 3.2% before rebounding. The Korean market had recently surged on an AI-led rally, which some traders now see as due for a pullback.

Japan's Nikkei 225 (.N225) declined 0.2%, while S&P 500 e-mini futures (EScv1) edged down 0.1%.

"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 Middle East conflict remained in a stalemate. U.S. President Donald Trump said on Tuesday he does not expect to need China's help to resolve 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 (LCOc1) fell 0.6% to $107.13 per barrel. Oil prices have remained above $100 since late February, following U.S. and Israeli strikes on Iran and Tehran’s effective closure of the Strait of Hormuz, which disrupted supply.

In Seoul, Samsung Electronics (005930.KS) shares plunged 5.7% after the company failed to reach a pay agreement with its South Korean labor union. More than 50,000 workers are expected to strike, threatening production of AI and other semiconductor chips.

On Wall Street, stocks declined overnight. The S&P 500 (.SPX) fell 0.2%, while the Nasdaq Composite (.IXIC) dropped 0.7% after U.S. consumer inflation recorded its largest increase in three years in April. The data raised concerns that the Federal Reserve may need to raise rates sooner than expected.

Markets have largely discounted the possibility of a Fed rate cut this year. Expectations for a 25-basis-point hike 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 remained unchanged at 4.469%, the highest level since July.

The U.S. dollar index (=USD), which measures the greenback against six major currencies, held steady at 98.322, marking its third straight day of gains. Against the yen (JPY=), the dollar was slightly stronger at 157.77 after the Japanese currency briefly spiked on speculation of potential intervention by Tokyo authorities, who have reportedly stepped in over the past two weeks to arrest the yen's decline.

Elsewhere, gold (XAU=) rose 0.1% to $4,718.48, while bitcoin (BTC=) declined 0.2% to $80,508.37, and ether (ETH=) slipped 0.4% to $2,275.36.

-Reporting by Gregor Stuart Hunter; Editing by Shri Navaratnam/Reuters