Nikkei, Kospi fall as US bond yields and inflation data spook markets

Asian stock markets faced substantial selling pressure on Friday, tracking sharp overnight losses on Wall Street triggered by hotter-than-expected US inflation metrics and surging bond yields. Japan's Nikkei dropped roughly 2% while South Korea's Kospi fell approximately 3%, driven lower by heavy declines in technology and growth stocks that are especially vulnerable to rising interest rate expectations. The selloff was sparked by the US Producer Price Index report for August, which showed final demand prices climbing 0.4% month-over-month and accelerating annual PPI to 5.4%. In response, US Treasury yields surged, with the 10-year yield approaching 5% and the 30-year yield touching 5.31%, its highest level since 2023. Consequently, markets increased the probability of a 25 basis point Federal Reserve interest rate hike next week to approximately 70%. Compounding market pressures, Brent crude soared over 6% to briefly surpass $108 per barrel due to Iran-related geopolitical tensions, compounding inflation fears and burdening energy-importing economies.