Key facts
- Asian markets traded higher on Wednesday, boosted by a surprise slowdown in U.S. inflation.
- U.S. headline CPI fell 0.4% in June, with annualized core inflation at 2.6%.
- Market pricing for a July U.S. rate hike was halved to 16%.
- China's Q2 GDP growth slowed to 4.3%, missing expectations.
- PayPal shares surged on reports of a $53 billion takeover offer.
- U.S. stock index futures edged higher as investors awaited corporate earnings and producer inflation data.
Asian markets traded higher on Wednesday, buoyed by a surprise slowdown in U.S. inflation that tempered expectations for further interest rate hikes. Oil prices saw a pause in their ascent as the U.S. abandoned plans to impose fees on shipping through the Strait of Hormuz. Investor sentiment was also lifted by strong earnings reports from major Wall Street banks.
South Korea's KOSPI surged 6% in early trading, while Japan's Nikkei rose 0.4%. The MSCI's broadest index of Asia-Pacific shares excluding Japan gained 1.7%.
The U.S. dollar weakened against most currencies, with the exception of the Japanese yen. Short-term bonds rallied, pushing two-year Treasury yields down 11 basis points to 4.19% from a 17-month high.
The U.S. headline consumer price index declined by 0.4% in June, marking its first decrease since the COVID-19 pandemic. Annualized core inflation registered at 2.6%, below the anticipated 2.8%.
Analysts at J.P. Morgan noted that the inflation data was highly favorable for market bulls, suggesting it should alleviate concerns about a July rate hike and potentially ease worries for September, setting a positive tone for broader market gains.
Market pricing for a U.S. interest rate hike in July was halved to 16%. The euro held steady above $1.14, and the Australian dollar maintained a 0.8% gain, testing the $0.70 level.
Brent crude futures stabilized around $85.50 per barrel, following a more than 12% increase over the preceding week attributed to heightened Middle East tensions. U.S. President Donald Trump reinstated a naval blockade on Iranian ports and issued threats regarding power plants and bridges, though the plan for a 20% fee on Hormuz shipping was rescinded.
Overnight, the Nasdaq Composite rose 0.9% and the S&P 500 climbed 0.4%. U.S. futures indicated a slight increase on Wednesday.
China's annual economic growth slowed sharply to 4.3% in the second quarter, missing analysts' expectations as weak domestic demand outweighed stronger production and exports.
U.S. stock index futures edged higher as investors braced for a fresh wave of corporate earnings as well as producer inflation data. PayPal Holdings jumped 18.5% in premarket trading after sources said payments company Stripe and private equity firm Advent International have jointly offered to acquire it for $60.50 per share, valuing PayPal at more than $53 billion. Major U.S. banks kicked off the second-quarter reports season with stronger-than-expected results. BlackRock reported a jump in second-quarter profit, and investors awaited numbers from Morgan Stanley. Chip stocks were mostly higher, helping lift Nasdaq futures, with U.S.-listed shares of ASML rising after the Dutch semiconductor equipment maker raised its 2026 financial forecasts.