Asia-Pacific equity markets started mostly higher, riding a wave of positive momentum from Wall Street driven by upbeat earnings reports and fading rate-hike bets after an in-line U.S. Consumer Price Index (CPI) print. The release of the closely watched inflation data provided clarity on the U.S. interest rate outlook, easing concerns that had kept investor sentiment cautious in prior sessions. The combination of solid corporate earnings and a benign inflation reading helped shift the regional mood, with most major indices posting gains.

Regional market performance

The session saw a sharp divergence across major Asia-Pacific indices. South Korea's KOSPI led regional gains, while Japan's Nikkei 225 also advanced strongly. Australia's ASX 200 was the lone decliner among the key benchmarks tracked. The table below summarizes the latest performance of key regional indices:

Market drivers

The in-line U.S. CPI print emerged as the pivotal catalyst for the session, with the data reinforcing expectations that the pace of rate hikes may slow. Fading rate-hike bets lifted sentiment across risk assets, as investors interpreted the inflation reading as reducing pressure on the U.S. Federal Reserve to tighten monetary policy further. Upbeat earnings reports from Wall Street added to the positive backdrop, giving regional markets a firm foundation to build on. The shift in tone marked a notable turnaround from the cautious positioning that had characterized earlier trading, when geopolitical uncertainty and an uneven earnings season had kept broad-based conviction limited.

Asia-Pacific equity markets opened on a weak note, tracking mixed signals from U.S. markets where the Nasdaq faced selling pressure. The catalyst behind the technology-sector weakness was attributed to reports of China successfully rolling out domestically developed Deep Ultraviolet (DUV) lithography equipment—a development with significant implications for the global semiconductor supply chain.

Regional Market Performance

The negative sentiment spread broadly across the Asia-Pacific region, with major indices recording declines at the open. The following table summarises the opening performance across key benchmarks:

Among the major indices, South Korea's KOSPI registered the steepest decline at -6.47%, reflecting the country's significant exposure to the semiconductor and technology hardware sectors. Japan's Nikkei 225 followed with a decline of -3.20%, while Australia's ASX 200 saw a comparatively modest dip of -0.32% at the open.

China's DUV Lithography Development as a Key Driver

The primary technology-related trigger for the regional selloff was the reported rollout of domestically developed DUV lithography equipment by China. DUV lithography is a critical technology used in semiconductor manufacturing, and China's reported progress in developing such equipment domestically carries broad implications for existing global suppliers and chipmakers across the Asia-Pacific region.

The news contributed to Nasdaq weakness in the preceding U.S. session, which in turn transmitted negative sentiment to Asian markets at the open. Countries with deep semiconductor industry ties—particularly South Korea and Japan—appeared most acutely affected by the development.

Broader Market Context

The declines across Asia-Pacific markets unfolded against a backdrop of mixed U.S. market cues, suggesting that while broader risk sentiment was not uniformly negative, technology-specific concerns dominated the open. The divergence in the scale of losses across indices—from the relatively contained ASX 200 decline to the sharp KOSPI drop—reflects the varying degrees of technology sector concentration within each market.

Key observations from the session opening include:

• KOSPI recorded the largest decline among the three indices, consistent with South Korea's prominent role in global semiconductor manufacturing.
• Nikkei 225 also saw a significant drop, reflecting Japan's exposure to technology hardware and equipment sectors.
• ASX 200 posted a more limited decline, in line with its relatively lower concentration of semiconductor-related equities.

The session underscored how developments in the global semiconductor landscape can rapidly transmit across Asia-Pacific financial markets, particularly when they intersect with existing geopolitical and trade dynamics.