Asian stocks set to rise after soft US inflation data

Asian equities were set for a second day of gains after cooler-than-expected US inflation weakened the case for an immediate Federal Reserve rate hike and lifted Wall Street sentiment. Futures pointed higher for Japan, South Korea, Australia and Hong Kong, while traders quickly reset expectations for the Fed’s next move.

The U.S. Bureau of Labor Statistics said June consumer prices fell 0.4% from May and rose 3.5% from a year earlier, the sharpest one-month decline since April 2020. Core inflation came in softer than feared, and that helped push market pricing for a July rate increase down to about 16% based on Fed funds futures at CME Group. The shift suggested investors were more comfortable with the Fed pausing while it waits for more evidence that inflation is under control.

The reaction was most dramatic in Seoul, where the chip-heavy KOSPI jumped more than 6% in early trade and, on some market trackers, traded above 7,300. SK Hynix led the move, rising about 10% in South Korea after its U.S.-listed ADRs surged 27.29%. Semiconductor names drew fresh attention as investors renewed bets on artificial intelligence demand and on a less restrictive rate environment that typically supports growth stocks.

Japan also joined the advance, with the Nikkei up 0.4%, while the broader regional tone remained tied to the softer US price data and solid early earnings from major American banks. The banking results helped support risk appetite at a moment when investors were looking for confirmation that corporate profits could hold up even as policy uncertainty lingered.

Oil extended gains for a third consecutive day amid geopolitical tensions, adding another layer of volatility to global markets. For investors in Asia, the inflation print offered a rare near-term relief rally, with expectations of lower-for-longer pressure on interest rates feeding directly into valuations, borrowing costs and the tone of capital flows across the region.