Volkswacht Bodensee - Tech leads Asia losses as rollercoaster week rumbles on

Worries over the Middle East crisis were also weighing on sentiment after US and Iranian forces exchanged fire, just hours after Donald Trump said a peace deal to reopen the Strait of Hormuz was close.

After a blistering AI-centred, tech-led rally since March, traders have been on edge this month as they contemplate a possible US rate increase, with surging inflation caused by the spike in crude costs putting pressure on the Federal Reserve to act.

All eyes will be on the release later in the day of the crucial consumer price index, which is expected to come in at its highest level in more than three years.

That followed forecast-topping US jobs figures Friday that ramped up rate hike talk.

However, the US president -- who lambasted Fed chair Kevin Warsh's predecessor for not cutting enough -- said earlier this month that he would "like to see lower interest rates" but that he would "let Kevin make that decision".

The prospect of higher borrowing costs has hurt the tech industry in particular as they dent consumer spending while firms also rely on debt to power innovation.

Analysts said the tech sell-off was part of a shift by investors into other sectors. Out of 11 sectors in the S&P 500, only tech and energy fell Tuesday, while the other nine advanced.

The Nasdaq and S&P 500 -- which have hit multiple record highs this year -- both ended down while the broader Dow edged up.

Investors are also battling worries about extended valuations of firms -- South Korean chip firm SK hynix has soared 220 percent this year alone -- and questions when they will see a return on the vast sums that have been pumped into AI in recent years.

"Early summer might turn out to be crunch time for investors as mega IPOs from the likes of SpaceX, Anthropic and OpenAI, as well as capital increases (such as Alphabet's $80 billion capital raising plans) and high debt issuance are likely testing investors' patience, optimism and pockets," wrote by Vincenzo Vedda at DWS.

"Meanwhile, though it seems to have moved markets less in recent weeks, the Iran conflict remains key to the macro environment, with both growth and inflation highly dependent on its implications and duration."

Asian markets were in the red, with AI-linked firms taking the most pain. South Korea's Samsung and SK hynix plunged 6.1 percent and 7.5 percent respectively, while in Tokyo tech investment titan SoftBank lost more than eight percent.

On broader markets, Seoul -- the poster child of the region's surge this year -- was down 4.5 percent.

The Kospi tanked more than eight percent Monday and soared the same Tuesday following the US jobs figures.

Taipei shed more than three percent and Tokyo 1.9 percent. Hong Kong, Shanghai, Singapore, Manila and also slipped. Sydney, Wellington and Mumbai rose.

Jakarta also gained as the rupiah strengthened following a surprise rate hike by the Indonesian central bank on Tuesday.

London was flat at the open while Paris and Frankfurt advanced.

Fears over a resurgence of the Middle East crisis added to trader anxieties after US forces struck sites in Iran in response to the downing of a helicopter on Monday, sparking a retaliatory attack on US bases in Bahrain and Jordan.

Trump said the United States would respond "in a strong manner" after "what they did with our helicopter last night", in a telephone interview with ABC News.

The attacks came after the president had said negotiations to end the war were in their final stages -- a claim he has made repeatedly in the past few weeks.

Crude jumped one percent Wednesday amid dimming prospects of a deal to reopen the Strait of Hormuz, through which a fifth of world oil passes, though they pared the gains later in the day.

The commodity had fallen as much as five percent at one point Tuesday on optimism a deal would be struck.

- Key figures at around 0715 GMT -

Tokyo - Nikkei 225: DOWN 1.9 percent at 64,179.27 (close)

Hong Kong - Hang Seng Index: DOWN 0.7 percent at 24,395.76

Shanghai - Composite: DOWN 0.4 percent at 3,993.23 (close)

London - FTSE 100: FLAT at 10,226.14

Euro/dollar: UP at $1.1554 from $1.1542 on Tuesday

Pound/dollar: UP at $1.3390 from $1.3382

Dollar/yen: DOWN at 160.37 yen from 160.39 yen

Euro/pound: UP at 86.29 pence from 86.25 pence

West Texas Intermediate: FLAT at $88.17 a barrel

Brent North Sea Crude: FLAT at $91.42 a barrel

New York - DOW: UP 0.2 percent at 50,872.11 (close)

K.Sutter--VB