Key facts
- Asian stock markets, including South Korea's Kospi, experienced a significant bounce on Tuesday.
- News of a potential de-escalation between Iran and Israel improved market sentiment and lowered oil prices.
Asian stock markets rallied Tuesday as investors bought the dip, buoyed by news of a halt in Iran-Israel attacks and strong Chinese trade data. Oil prices fell on the de-escalation hopes, though concerns remain about narrow market breadth and bond yields testing equity valuations.
The rebound in Asian markets and dip in oil prices suggest a temporary easing of geopolitical tensions, but underlying concerns about market breadth and investor leverage persist.
Asian markets experienced a significant rebound on Tuesday, with investors showing a renewed appetite for risk. The mood was lifted by news that Iran and Israel had reportedly agreed to a temporary halt in attacks, which also contributed to a dip in oil prices.
South Korea's Kospi index surged by nearly 5%, recovering from an 8% decline on Monday. The index remains up an impressive 83% for the year, a bull run that has attracted a growing number of retail investors. Concerns exist about their vulnerability to margin calls, especially as leveraged investment into equities, including chipmaker-leveraged ETFs, reached a record 60 trillion won ($39.06 billion) by the end of May, according to a Bank of Korea report.
Chinese shares were supported by robust trade data, which showed exports rising 19% and imports climbing 27% in May, both surpassing forecasts. The increase in imports is notable, particularly as oil imports have fallen 29% year-on-year, reaching their lowest daily pace since 2018. China's trade surplus with the United States has reached nearly $114 billion year-to-date.
In contrast, European stock futures were trading modestly lower, while Wall Street futures showed slight gains. The previous day's trading on Wall Street saw demand for semiconductor stocks provide a crucial support, though more than 60% of S&P 500 companies ended the session lower.