Key facts
- Asian shares declined due to weakness in chipmakers, with South Korea's KOSPI down 6.3%.
- Taiwan Semiconductor Manufacturing Co. (TSMC) is expected to report a significant surge in net profit.
- Softer U.S. inflation data has reduced market expectations for an imminent Federal Reserve rate hike.
- Oil prices continued to rise amid escalating Middle East tensions.
- ASML's shares finished lower despite raising its 2026 sales forecasts.
Asian shares declined as chipmakers faced pressure ahead of quarterly results from Taiwan Semiconductor Manufacturing Co. (TSMC), while bonds benefited from a benign U.S. inflation reading that lessened the risk of an imminent rate hike. Oil prices, however, continued to climb amid escalating hostilities in the Middle East.
MSCI's broadest index of Asia-Pacific shares outside Japan slid 1.7%, with South Korea's KOSPI slumping 6.3% on weakness from Samsung and SK Hynix. Japan's Nikkei dropped 3%, and Taiwanese shares fell 0.5%, while China's Hang Seng Index gained 1.2%.
South Korea's central bank raised interest rates for the first time in 3-1/2 years to 2.75% to stabilize a slumping won and counter inflationary pressure. Wall Street had gained overnight as investors rotated into Magnificent Seven stocks and banks, but Asia is more vulnerable to the chip sell-off due to its heavier exposure to semiconductor stocks.
Surprisingly soft U.S. PPI data for June added to the benign consumer inflation figures from the previous day, leading markets to price out the risk of an imminent rate hike from the U.S. Federal Reserve. Bond investors focused on the cooler inflation data, with two-year Treasury yields edging up and ten-year yields holding steady. The dollar index was steady, except against the yen, which hovered near a 40-year low. Sterling hit two-month highs against the dollar.