Seoul surges 7% as cooler US inflation eases July rate hike fears
Asian equities rallied sharply, led by a 7% jump in Seoul, after softer-than-expected US inflation data reduced the immediate threat of a Federal Reserve rate hike this month.
US consumer prices rose 3.5% last month, down from May's three-year high of 4.2% and well below the 3.8% forecast. The sharp six-year pullback, aided by a prior drop in energy costs, prompted investors to scale back bets on a July Federal Reserve rate hike, triggering a broad relief rally across Asian markets.
Seoul spearheaded the regional recovery, surging as much as 7% as battered technology stocks rebounded. Chip giant SK hynix rallied 10%, recovering some ground after a roughly 30% slump from its record high last month. The sector had been heavily sold off over concerns regarding massive artificial intelligence investments and stretched valuations.
The upbeat sentiment filtered through to Tokyo, Hong Kong, Sydney and several other regional indices, supported by a strong kickoff to the US earnings season. Profits rose across major banking groups including JP Morgan, Citigroup and Goldman Sachs. Not all tech fared well, however, with IBM collapsing more than 25% after blaming a shift in customer spending caused by expected higher prices for memory chips and other AI infrastructure.
Shanghai bucked the regional trend, dipping after data revealed China's economy grew slower than expected in the second quarter. Early trading in London, Paris and Frankfurt also pointed to losses.
Underlying geopolitical risks threatened to undermine the inflation progress. Crude prices extended their rally, climbing more than 10% over the past week after US forces struck Iranian sites and President Donald Trump reimposed a naval blockade. This escalation erased much of the earlier relief from a temporary truce that had briefly reopened the Strait of Hormuz.
The renewed oil surge complicates the inflation outlook and drew warnings from market analysts. "The recent rebound in oil prices and renewed US-Iran tensions could yet complicate the inflation outlook if higher energy costs persist," wrote Fiona Cincotta at City Index.
Federal Reserve officials moved to temper market optimism. Fed boss Kevin Warsh told lawmakers it was "too early to celebrate," insisting the central bank has "no tolerance" for stubbornly high prices. Stephen Innes of SPI Asset Management noted that while the data "simply removed the tripwire sitting directly in front of July," markets still anticipate at least one rate hike this year.
