Asian stocks saw a strong rebound, driven by cooler-than-anticipated US inflation figures for June. Both the Consumer Price Index (CPI) and Producer Price Index (PPI) came in below expectations, causing market pricing for a July Federal Reserve rate hike to halve from 42% to 17%. This shift in sentiment helped offset concerns about an AI IPO hangover and a smart money exodus from the region, as noted by Bloomberg. President Trump’s decision to drop plans for a 20% cargo charge through the Strait of Hormuz further bolstered positive sentiment, contributing to one of the best days for Asian stocks this month.
Major US banks, including JPMorgan, Goldman Sachs, Citi, Bank of America, and Wells Fargo, collectively reported record second-quarter profits totaling $49 billion, surpassing Wall Street estimates. This was fueled by robust deal-making, including the SpaceX IPO, and healthy trading revenues amidst geopolitical volatility. However, not all tech news was positive; IBM suffered a record 25% single-day loss after warning of lower-than-expected Q2 results, as clients shifted spending from software to hardware. This benefited server infrastructure vendors like Dell, Hewlett Packard Enterprise, and Lenovo, while Nvidia rose to one-month highs due to overwhelming enterprise hardware demand.
Korean equities experienced significant two-way volatility, but today saw the Kospi surge as much as 8%, pushing it back above 7,000. SK Hynix jumped 8.8% in Seoul, partially closing the 50% premium seen in its ADRs during US trading. Japan's Nikkei also gained 1.2%. The Nasdaq Composite rose 0.8% in the Asian session, recovering previous losses. Sentiment was additionally boosted by a report of a $53 billion takeover bid for PayPal by Stripe and Advent International, and ASML beating Q2 estimates while sharply raising its fiscal year 2026 revenue outlook due to increased customer capital expenditure and accelerated plans.
Despite the positive day, underlying risks persist. The Bank of Korea (BOK) is expected to hike rates by 25 basis points tomorrow, with markets pricing in an 89% probability. This would be the first hike in three and a half years, driven by June CPI hitting a 2.5-year high of 3.2% and concerns over financial stability and a housing market overheating. Meanwhile, competition in the AI market continues to intensify, with Alibaba Cloud cutting pricing for Zhipu's GLM-5.2 Fast Mode by 20%, and another LLM developer, DeepSeek, preparing for an IPO filing in Shanghai next year, indicating margin compression for top AI models.
