Asia Stocks Surge as US CPI Posts First COVID-Era Drop
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- US headline CPI fell 0.4% in June — its first monthly decline since the COVID pandemic — while annualised core inflation came in at 2.6%, below the 2.8% economists had forecast.
- Asian equities surged in response: South Korea's chip-heavy KOSPI jumped 6%, Japan's Nikkei added 0.4%, and MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.7%.
- Two-year US Treasury yields dropped 11 basis points to 4.19% from Tuesday's 17-month high near 4.3%, and market pricing for a July Fed rate hike halved to 16%.
- Brent crude steadied around $85.50 a barrel after gaining more than 12% this week on a Middle East flare-up, even as Trump scrapped a planned 20% fee on shipping through the Strait of Hormuz.
- IBM shares plunged 25% after the company's revenue forecast missed analyst expectations, a signal — per Reuters — of how stretched and skittish the market's rally in AI-related stocks has become.
- Trump reimposed a naval blockade of Iranian ports on Tuesday and threatened to attack power plants and bridges next week unless Iran resumes negotiations to end their conflict.
- ASML, described as Europe's most valuable company and the world's biggest supplier of AI-chipmaking equipment, was set to report earnings during European hours, with Chinese GDP, industrial production, and retail sales data also in focus.
Why it matters: The first monthly CPI decline since COVID gives the Fed cover to hold rates steady, with JP Morgan calling it a 'Goldilocks' setup of lower inflation plus positive earnings growth. IBM's 25% drop shows the AI trade's leaders now face real scrutiny, and Brent's 12% weekly gain keeps inflation's geopolitical wild card live despite the friendly print.
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