Asian stocks rise after soft US CPI, Kospi rallies over 6% on SK Hynix wins

ASIAN shares rose on Wednesday (Jul 15) as cooler-than-expected US inflation data reduced expectations of Federal Reserve interest rate hikes and the artificial intelligence trade gathered fresh momentum, while oil rose.

MSCI’s Asia Pacific equities gauge climbed 1.2 per cent, with more than three stocks advancing for every decliner. South Korea’s Kospi jumped more than 6 per cent, led by a 10 per cent gain in SK Hynix after its American depositary receipts (ADRs) surged 27 per cent.

Shares also rose in Japan and Australia, putting the regional benchmark on track for a second day of gains.

Among major markets moves, S&P 500 futures were little changed as at 9.45 am Tokyo time. The Hang Seng futures rose 0.2 per cent, the Nikkei 225 futures (OSE) rose 0.7 per cent, Japan’s Topix rose 0.6 per cent and Australia’s S&P/ASX 200 rose 0.5 per cent.

Treasuries steadied after a rally sent yields sharply lower on Tuesday as traders unwound bets that the Fed would begin raising interest rates as soon as July.

The US dollar weakened against all of its Group-of-10 peers, while gold held its gains from Tuesday to trade around US$4,050 an ounce.

Oil rose for a third day as US President Donald Trump threatened further strikes on Iran, hours after the US resumed its blockade on the Islamic Republic’s shipping through the Strait of Hormuz.

Global benchmark Brent advanced 1.8 per cent to above US$86 a barrel after surging 11 per cent in the previous two sessions.

The weak US inflation numbers and a strong start to the earnings season have revived the AI trade, boosting technology stocks after a recent bout of volatility.

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While the data gives the Fed more room to keep rates on hold, escalating tensions in the Middle East continue to cloud the inflation outlook by threatening higher energy prices.

“Softer than expected CPI is a big relief,” said Tiffany Wilding at Pacific Investment Management. While the “report will not eliminate discussion of further tightening entirely, it should effectively remove a July rate hike from consideration”.

“Fuel futures are far more elevated than crude peers, suggesting investors are complacent in pricing for this year’s energy supply shocks to rapidly fade, especially given the recent escalation in the US-Iran conflict,” said Garfield Reynolds, markets live Asia team leader at Bloomberg.

That’s a dynamic that will haunt equities, credit and bonds, given investors have been so willing to bet that the impact of wars in the Middle East and Europe would prove transitory,” said Reynolds.

Attention in Asia will once again be on the chips sector after a volatile session on Tuesday.

The premium for SK Hynix’s ADRs over their Korean-listed shares soared to more than 50 per cent, just three days after making their US trading debut.

Earlier, the S&P 500 rose with after major banks posted solid results, while a rally in chipmakers helped lift the Nasdaq 100. International Business Machines sank 25 per cent on a sales miss.

In oil, traders are paying close attention to refined products. Fuel markets in the US and Europe are flashing record tightness as tensions flare up in the Middle East, threatening more pain for consumers already strained with high prices at the pump.

Also, Russia is struggling to deliver all of the crude it’s being forced to ship overseas in the face of escalating Ukrainian drone strikes on its refineries.

Elsewhere, in testimony before US lawmakers, Fed chairman Kevin Warsh said central bank officials have no tolerance for high inflation, reiterating a vow to tame price growth.

Warsh said the June inflation reading was better than expected, but has a long way to go.

“I’m not going to show up here and say mission accomplished,” Warsh said. “What I’d say is there’s plenty of work to do.” BLOOMBERG