South Korea’s Kospi plunges 10%, triggering circuit breaker in global tech rout

Global Tech Selloff Hits Markets as Fed Rate Hike Bets Rise

Global stock markets tumbled on Tuesday as a tech-led selloff originating on Wall Street swept through Asia and Europe, with South Korea’s Kospi index plunging nearly 10% and triggering a rare circuit breaker that halted trading for 20 minutes. The rout, fueled by concerns that the artificial intelligence rally has overheated and that the Federal Reserve is preparing to raise interest rates, marks one of the sharpest single-day declines for technology stocks this year.

Asia Bears the Brunt

South Korea’s benchmark Kospi closed at 8,203.84, down 910.71 points or 9.99%, according to Firstpost, prompting the Korea Exchange to activate market-wide circuit breakers for the first time since early March. Samsung Electronics and SK Hynix — the market’s two largest stocks — plunged 12.31% and 12.47% respectively, as foreign investors offloaded shares across the board. A report in local media indicated SK Hynix is slowing expansion of AI memory chip production and shifting emphasis to cheaper commodity DRAM, adding fuel to the selloff.firstpost

The broader Asian rout followed Monday’s losses in U.S. megacap technology stocks. MSCI’s All Country World Index fell 0.5%, while an Asian equity gauge dropped more than 2% after recently hitting a record high.financialjuice

Europe and U.S. Futures Follow

In Europe, the STOXX 600 fell 1.3% to 631.06 points — its lowest level since June 12 — with technology stocks down 3.2%, on track for their steepest daily drop in months, according to Reuters. Dutch chipmaker ASML dropped 5%, while STMicroelectronics and ASMI fell more than 7%. Futures tied to the Nasdaq 100 in New York slid 2.7% ahead of the regular session.wsj

Fed Hike Expectations Compound the Pressure

The selloff comes against the backdrop of rapidly shifting expectations for Federal Reserve policy. After the Fed held rates steady on June 17 but signaled hawkish intentions under new Chair Kevin Warsh, trader bets on a rate hike by year-end surged. Bank of America now projects 75 basis points of hikes — in September, October, and December — making it the most aggressive forecast among major Wall Street banks. Deutsche Bank, which as recently as April expected rates to stay unchanged, now calls for two 25-basis-point increases totaling 50 basis points.straitstimes

The prospect of tighter monetary policy has added pressure on companies that have loaded up on debt to fund AI infrastructure buildouts, raising questions about whether the spending spree that powered this year’s tech rally can be sustained.usnews