The most expensive number in the world this week was 0.6.
That is how much American consumer prices rose in September alone, according to the Bureau of Labor Statistics on Wednesday. By Thursday morning in Seoul, it helped knock South Korea’s main stock index down more than 7%. If you have ever wondered how a fuel bill in one country ends up in a pension on the other side of the planet, this week drew the map for us.
What the Report Said
Prices in the United States were 3.7% higher than a year earlier, up from 3.4% in August and slightly above the 3.6% economists had expected. Core inflation, which strips out food and energy, rose to 2.6% from 2.4%.
The loud part of the story was fuel. Economists pointed to the war involving Iran, which has pushed up the cost of oil and everything refined from it. The quiet part was core inflation, because it suggests rising prices have spread beyond the petrol pump and into the rest of the shopping basket. Analysts also mentioned tariffs, the cost of building AI data centres, and strong demand for things like travel.
Fuel can fall as fast as it rises. Prices that have settled into rents and services tend to stay put, which is exactly why markets paid more attention to the quiet part.
Why Interest Rates Came Into It
In September, the Federal Reserve raised interest rates for the first time in more than three years, to a range of 3.75% to 4%. Before Wednesday, traders thought another rise at the meeting on 27 and 28 October was fairly unlikely. After the report, the odds roughly doubled, from about 22% to around 44%, according to CME FedWatch data reported by Axios.
That shift moved money everywhere at once. The yield on two-year US government bonds jumped. The dollar rose. Even sterling noticed, falling further against the dollar on Wednesday more than other major currencies.
Why the Chips Took the Hit
This is the part I find most useful. Chip companies, particularly those powering artificial intelligence, are priced on profits many years into the future. When interest rates rise, money promised is worth less today, so companies with the longest promises are marked down hardest.
That is what happened. The S&P 500 fell by the most since July, a gauge of the biggest chip companies sank 4.3%, and the Russell 2000 index of smaller companies slipped into a correction, according to Bloomberg. Then the selling crossed the Pacific. By Thursday morning, the Kospi was down 7.6%, with Samsung Electronics and SK Hynix each sinking more than 9%. South Korea’s market had already lost 5.5% on Tuesday as worries about AI and Chinese competition hit the same two companies.
Meanwhile, healthcare and consumer staples shares in the United States rose by more than 2% on Wednesday. Medicine and toothpaste do not care much about interest rates. People buy them regardless.
What I Did
Nothing dramatic, which I am slowly learning is a skill in itself. I didn’t sell anything in a hurry, and I did not rush to buy the fall either. I did look at what went up, not just what went down. I noticed, not for the first time, that the dull end of the market has excellent manners in a crisis.
It also reminded me why I keep an eye on what sits underneath a market headline. As I wrote recently, an index can look calm while most of its shares are struggling. This week showed the opposite: a handful of very large companies can drag a whole market down with them.
What to Watch Next
The Federal Reserve meets on 27 and 28 October. Between now and late October, every new price figure will be read for clues, and oil, with Brent trading above $100 a barrel this week, remains the wild card. If you hold a pension or a global fund, Washington and Seoul are already in it, whether you checked or not.
The Jacqueline Brand: knowledge builds confidence; confidence builds wealth.
This is editorial commentary for information and education only. It is not financial, investment or professional advice, and nothing here is a recommendation to buy or sell any investment. The Jacqueline Brand is not authorised or regulated by the Financial Conduct Authority. The value of investments can fall as well as rise, and past performance is not a guide to future returns. Figures were correct at the time of publication. Always do your own research and consider speaking to a regulated adviser.
