South Korea stocks fall after hot U.S. inflation

That repricing is hitting Korea hardest through semiconductors and other rate-sensitive growth names. The Kospi opened down 5.59% and the Kosdaq fell 4.79% before both triggered selling sidecars, a sign of forced deleveraging and thin liquidity under stress. The selloff also reflects how dependent Seoul’s rally has been on foreign inflows into chips and AI-linked stocks.

In the U.S., the inflation data lifted Treasury yields and revived talk of another Fed hike, while credit markets showed the strain in parts of the AI ecosystem. Daishin Securities pointed to CoreWeave’s credit default swap spread widening to 1,117 basis points, with its bond price dropping to 77 cents on the dollar, as evidence that higher rates are starting to bite at leveraged AI names.

Economists and strategists in Korea said the risk is no longer just one more hike, but an extended tightening cycle if energy prices keep feeding through into services inflation. Hyundai Motor Securities estimated the probability of a 25-basis-point move in October had surged to 53.7% from 22.1% after the CPI release, while other houses warned the Fed may need to keep the option of additional hikes open into early 2027.

The pressure is showing up in market indicators as well. The SPY sentiment snapshot from Adalytica shows broad U.S. equity sentiment still elevated at 80, but awareness at an “Extreme Fear” reading of 1, while dollar signals remain firm and FX volatility is rising, reinforcing the view that investors are bracing for more policy turbulence.

For Korean investors, the immediate risk is that a U.S. inflation shock turns into a valuation reset for chips, AI and other high-duration assets that powered this year’s gains. The next catalyst is the market’s read on upcoming U.S. producer prices and whether they confirm that inflation is broadening beyond gasoline into services and producer costs.