Kospi falls 1.6% as Asian stocks drop after Fed rate hike bets
Published Mon, Aug 31, 2026 · 09:47 AM — Updated Mon, Aug 31, 2026 · 01:44 PM
ASIAN stocks fell with US equity-index futures after hawkish comments from US Federal Reserve chair Kevin Warsh boosted bets on an interest rate hike in September. Oil rose as Middle East tensions flared.
MSCI’s Asia-Pacific equities gauge dropped 0.8 per cent, snapping a four-day advance, with technology shares leading losses.
The Kospi Index – a barometer for artificial intelligence investments – slid 1.6 per cent, with chipmakers Samsung Electronics and SK Hynix the biggest drags. Nasdaq 100 futures fell 0.5 per cent.
Among the main market moves, S&P 500 futures fell 0.4 per cent as at 1.42 pm Tokyo time.
Japan’s Topix rose 0.1 per cent, Australia’s S&P/ASX 200 fell 0.2 per cent, Hong Kong’s Hang Seng fell 0.7 per cent and the Shanghai Composite fell 0.2 per cent.
Treasuries recouped some of last week’s decline in Asian trading, with the yield on the two-year note slipping two basis points to 4.32 per cent.
Bloomberg’s US dollar gauge also eased after the Fed chief’s Jackson Hole speech spurred its biggest advance in two months on Friday (Aug 28).
Gold extended its losses to trade around US$4,425 an ounce on concern that higher interest rates will diminish the appeal of the non-yielding metal.
Brent crude climbed 2.4 per cent to US$90.20 a barrel after the US military on Sunday struck Iranian rocket launchers, ending weeks of relative calm.
The negative tone in equities followed Warsh’s comments that inflation is not meaningfully slowing, and policymakers have “work to do” if they are not confident that it is.
Traders boosted bets on a September rate hike after he spoke, although some market commentators expressed scepticism about such a move.
Higher borrowing costs also risk undercutting 2026’s rally in AI shares, where elevated valuations make tech stocks vulnerable to rising yields.
Escalating Middle East tensions compounded the pressure as oil climbed, adding to inflation risks.
“Asian markets are opening the final session of the month with a cautious ‘what-comes-next’ mood,” said Hebe Chen, a senior market analyst at Vantage Global Prime.
“Kevin Warsh’s hawkish Jackson Hole message has put another Fed hike firmly back on the table, leaving rate-sensitive tech particularly exposed and suggesting the near term could remain more about managing volatility than chasing the next leg higher.”
Traders boosted bets to 65 per cent that the Fed will raise its benchmark rate when it meets in September from about 34 per cent odds before Warsh spoke, according to swaps data compiled by Bloomberg. Markets are also pricing in at least one more hike over the coming year.
Warsh said financial conditions are not currently restrictive and described rates as the Fed’s “predominant tool” for achieving its mandate, while stopping short of signalling support for a hike in September.
Even so, bond investors at firms including ABN AMRO Investment Solutions and Brandywine Global Investment Management are voicing scepticism about mounting speculation that Warsh is poised to raise interest rates.
Some investors have their doubts after the chairman’s appearances jolted markets over the last few months, even as he has consistently vowed to tamp down inflation.
That has them bracing for the risk he keeps rates steady again, as he did in June and July, adding to Fed credibility worries that have helped drive long-maturity yields to the highest levels in about two decades.
Elsewhere, the yen hovered around 160 per US dollar after hitting its weakest level in a month.
Traders will be alert to stronger rhetoric from Japanese officials after the currency weakened on Friday after the US dollar surged, erasing more than half of its intervention-fuelled gains.
In geopolitical news, the attack by the US was the first military action against Iran in more than a month, as US President Donald Trump has switched to a campaign to drive Iran to the negotiating table by squeezing its economy.
Iran’s Islamic Revolutionary Guard Corps launched a missile-and-drone attack on US air bases in Jordan early on Monday in retaliation.
“For now, the latest news flow does little to accelerate diplomatic talks, but traders are not showing any major surprise at the developments and are trading the headlines accordingly,” Chris Weston, head of research at Pepperstone Group, wrote in a note. BLOOMBERG
