Investing.com– Most Asian stocks drifted higher on Wednesday tracking gains in the technology sector, while Australian shares fell sharply as hotter-than-expected inflation data ramped up concerns over higher interest rates. 

Regional markets took some positive cues from Wall Street, where a rebound in heavyweight chipmaking stocks, particularly NVIDIA Corporation (NASDAQ:), helped the and end higher. But anxiety over an upcoming inflation reading saw economically sensitive stocks retreat, with the closing lower.

U.S. stock index futures were muted in Asian trade. 

Australian stocks sink as hot CPI sparks rate hike fears 

Australia’s index was the worst performer in Asia, down 1% after inflation data read hotter than expected for May. 

The reading ramped up expectations that the Reserve Bank of Australia could potentially hike interest rates in August. While the central bank has not explicitly mentioned the possibility of a rate hike, it did strike a more hawkish tone than markets were expecting at a meeting last week.

Wednesday’s CPI reading showed inflation moving further away from the RBA’s 2% to 3% annual target range- a scenario that is likely to invite more hawkishness from the central bank. Australian bond yields also shot up after the print. 

Nikkei, KOSPI buoyed by tech gains 

Japan’s index was the best performer in Asia, rising 0.9% on gains in heavyweight technology stocks, particularly chipmakers. Gains in chipmakers also saw South Korea’s add 0.3%. 

Chipmakers rose tracking an overnight rebound in Nvidia, as the artificial intelligence darling recovered from three days of steep losses. Asian stocks linked to the firm also clocked strong gains on Wednesday, with Japan’s Advantest Corp. (TYO:) up 6.1%, while SK Hynix Inc (KS:) added 4.4%. 

TSMC (TW:) (NYSE:), the world’s biggest contract chipmaker, added 1% in Taiwan trade.

Chinese stocks sluggish, trade tensions persist 

China’s and indexes fell 0.4% each, while Hong Kong’s index rose marginally on Wednesday.

Sentiment towards China remained largely on edge amid concerns over a potential trade war with the West, especially after Beijing flagged such a possibility in the face of European tariffs on imports of Chinese electric vehicles. 

Fears of a trade war saw Chinese indexes nursing steep losses through June, as cheer over more stimulus measures in the country also ran dry. 

Among other Asian markets, futures for India’s index pointed to a mildly positive open, after the index and the surged to a record high on Tuesday. Renewed optimism over the Indian economy has been a key driver of stock gains in recent weeks, as Indian markets recovered past the results of the 2024 general elections.