Short Description: Asian stocks retreated from peaks as tech margin fears spooked investors, driving a flight to bonds ahead of critical U.S. inflation data that could reshape Fed rate cut expectations.
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A sharp tech sell-off on Wall Street, led by plunging shares of Cisco and Apple, spilled over into Asian markets on Friday, interrupting a record-breaking rally. Investors, spooked by warnings of shrinking profit margins in the tech sector, rotated out of high-flying growth stocks and into safer assets. This risk-off sentiment pulled major indices like Japan’s Nikkei and Hong Kong’s Hang Seng lower, as the market narrative quickly shifted from exuberance to caution ahead of a major economic test.
The flight to safety bolstered U.S. Treasuries, sending the benchmark 10-year Treasury yield tumbling its most since October. A strong bond auction further pressured longer-term yields, with markets now pricing in a 70% chance of a Federal Reserve rate cut in June. All eyes are now on the upcoming core PCE inflation report—the Fed’s preferred gauge. Economists forecast a slowdown to 2.5% annually, and an in-line reading could bolster hopes for policy easing later this year, potentially reigniting the cyclical trade.
In commodities, oil prices stabilized after a steep drop on demand concerns, while gold and silver rebounded from heavy losses. Currency markets saw the risk-sensitive Australian and New Zealand dollars weaken. The day’s pivotal U.S. inflation data will determine if this pullback is a brief pause or the start of a deeper correction, as traders assess the interplay between corporate earnings pressures, AI disruption fears, and the trajectory of interest rates.
Short Summary: A tech-led equity sell-off driven by margin concerns triggered a shift into bonds, lowering Treasury yields ahead of key U.S. inflation data. The core PCE report will critically influence Federal Reserve rate cut expectations and determine if the current market pullback deepens or reverses. Investors are balancing tech sector risks against the outlook for monetary policy easing.
