Asian stocks rally as soft U.S. inflation dents Fed hike bets

Asian equities climbed broadly on Thursday after U.S. consumer prices rose in line with expectations in July, easing concerns about an imminent Federal Reserve rate hike and sending South Korea's Kospi surging nearly 5% in a rally led by semiconductor stocks.

Inflation Relief Lifts Regional Markets

U.S. consumer prices increased 0.1% in July, matching forecasts, while core CPI excluding food and energy rose 0.2% month-over-month and 2.5% year-over-year — the slowest annual pace since March 2021. The subdued reading reduced expectations that the Fed would raise rates at its September meeting, with money markets now pricing in a 40% chance of a hike, down from 54% a week earlier, according to CME Group's FedWatch tool.reuters+2

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.97%. South Korea's Kospi jumped as much as 4.8% intraday, rebounding roughly 30% from its July 29 intraday low. Japan's Nikkei 225 gained nearly 1.9%.globalbankingandfinance+3

"The big surprise with a report that had no surprises is that a situation where inflation isn't re-accelerating, coupled with the most recent, weak jobs report gives the Fed more time to wait," said Chris Zaccarelli at Northlight Asset Management.businesstimes

Semiconductors Drive the Rally

Technology and memory chip stocks were the primary drivers across the region. Samsung Electronics rose more than 5%, SK Hynix ↗ 9.01% surged over 7%, and Japan's Kioxia gained nearly 7%. The moves followed a strong session on Wall Street where AI and memory chip names outperformed, with the Nasdaq Composite gaining 0.54% and the S&P 500 rising 0.26%.tradingkey

Gary Schlossberg, global strategist at Wells Fargo Investment Institute, said the CPI reading and a cooler jobs report "may keep hawkish Fed officials at bay in September," but cautioned that volatile oil prices tied to the ongoing Middle East conflict and lingering core price pressures remain risks.businesstimes

Oil and Currencies in Focus

Oil prices eased slightly but remained elevated, with Brent crude hovering near $88 a barrel as the U.S. and Iran remained deadlocked over efforts to end the Gulf conflict. The Japanese yen held near 159 per dollar, keeping markets alert to the possibility of further intervention by Japanese authorities. Speculation also grew that the Bank of Japan could raise rates as early as September, earlier than the previously expected December timeline, after Japan's wholesale prices rose 7.2% year-over-year in July.ndtvprofit+3