Morning Market Update: Fed Rate Hike Probability Soars to 73%! U.S. PPI Up 5.4% Sparks Sell-Off, Taiwan Stocks Open Down 289 Points

International oil prices surged sharply, and U.S. Treasury yields approached 5%, while the U.S. Producer Price Index (PPI) indicated persistent inflationary pressures, boosting expectations of a Federal Reserve (Fed) rate hike next week. As a result, all four major U.S. stock indices closed lower on Thursday (10th). Combined with a 797-point (1.7%) drop in Taiwan's stock index futures during overnight trading, Taipei's stock market opened down 289.28 points (0.62%) today (11th) at 46,651.21 points.

With the broader market opening lower, small and mid-cap stocks also declined. The GreTai Securities Market Index (OTC) opened down 2.2 points (0.54%) at 403.04 points. All large-cap stocks fell: TSMC opened down NT$20 at NT$2,430; MediaTek dropped NT$85 to NT$4,635; Delta Electronics fell NT$80 to NT$1,595.

Tensions between the U.S. and Iran escalated further in the seventh month of conflict, and Saudi Arabia reduced crude oil production to its lowest level since 1990, sharply increasing market concerns over global energy supply.

Brent crude futures rose USD 6.42 (6.34%) to close at USD 107.63 per barrel. U.S. oil prices surpassed USD 100 per barrel for the first time since May, with West Texas Intermediate (WTI) crude futures gaining USD 6.43 (6.69%) to settle at USD 102.48 per barrel.

Soaring energy prices reignited inflation concerns. The yield on the U.S. 10-year Treasury note briefly exceeded 4.95%, the highest since October 2023. The yield on the more policy-sensitive 2-year Treasury note also rose to around 4.60%.

On the data front, the U.S. August Producer Price Index (PPI) rose 0.4% month-on-month and 5.4% year-on-year. The monthly increase met market expectations, but the annual rate exceeded some forecasts of 5.3%.

According to the CME Group's FedWatch tool, traders now estimate a 73% probability of a 25-basis-point rate hike by the Fed at its September 16 meeting, up from approximately 64% before the data release.

All four major U.S. indices closed lower: the Dow Jones Industrial Average fell 316.56 points (0.60%) to 52,064.10; the Nasdaq Composite dropped 171.62 points (0.65%) to 26,081.73; the S&P 500 declined 44.66 points (0.58%) to 7,591.70; and the Philadelphia Semiconductor Index (SOX) plunged 317.16 points (2.66%) to 11,614.17.

Taiwan stock index futures also fell sharply in overnight trading, closing down 797 points (1.7%) at 46,072. TSMC futures ended after-hours trading down NT$32 (1.31%) at NT$2,415.