Asian Markets Retreat as Japan Leads Pullback, Tech Shares Slip Amid PCE Inflation Data Anticipation

Market Overview - Asian stock markets broadly retreated on December 5, 2025, with Japan leading the decline as investor caution intensified ahead of key US inflation data [2][9] - The MSCI Inc.'s gauge for regional shares fell as much as 0.6%, primarily driven by a significant pullback in Japan [9] Japan's Market Performance - The Nikkei 225 (JP225) index fell by 1.34% to 50,346 points, extending losses from the previous session, largely due to expectations of a potential Bank of Japan (BOJ) interest rate hike [3][9] - The Topix index also saw a 1.1% drop, reflecting the negative sentiment in the market [3] Technology Sector Impact - The technology sector emerged as the biggest drag on the regional benchmark, with South Korean chipmakers like Samsung Electronics and SK Hynix contributing to the decline in the KOSPI index [4][9] - Reports about Microsoft potentially trimming AI sales growth targets briefly rattled global tech sentiment, highlighting investor sensitivity to AI-fueled valuations [4] US Market Context - Despite the cautious sentiment in Asian markets, the US S&P 500 (SPX) managed to hold steady, closing up 0.15% at 6,860.00 on December 4, 2025, remaining only 0.5% shy of its peak [6][9] - The resilience of the S&P 500 comes amidst mixed economic indicators and ongoing discussions surrounding the long-term impact and valuation of artificial intelligence investments [6] Upcoming Economic Indicators - Market participants are highly cautious ahead of the release of the US Personal Consumption Expenditures (PCE) price index, which is expected to influence future interest rate decisions by the Federal Reserve [5][9] - Money markets are currently pricing in a high probability, around 87% to 90%, of a 25-basis-point rate cut by the Fed at its upcoming December 9-10 meeting [5]