Asian Stocks Advance on Softer US Inflation Data; China GDP Miss Caps Gains

Most Asian stock markets advanced on Wednesday, drawing positive cues from Wall Street after softer-than-expected U.S. inflation data reduced expectations for an imminent Federal Reserve interest rate hike. However, gains were capped by disappointing economic growth figures from China and persistent geopolitical risks in the Middle East.

US Inflation Cools, Boosting Sentiment

The primary catalyst for the rally was U.S. economic data released Tuesday, which showed a significant cooling in price pressures. The headline consumer price index (CPI) fell by 0.4% in June, its first monthly decline since the start of the pandemic, according to the report. Core inflation, which excludes volatile food and energy prices, held steady at 2.6%, below analyst expectations.

The data prompted traders to pare back bets on a Fed rate hike this month, leading to a drop in U.S. Treasury yields and a rally in equities, particularly in the technology sector. U.S. stock index futures continued to rise during Asian trading hours.

Mixed Performance Across the Region

South Korea’s KOSPI was the region's standout performer, surging approximately 7% on the back of a strong rally in heavyweight semiconductor stocks. Shares in SK Hynix jumped nearly 13%, while Samsung Electronics climbed around 8% amid reports it was reviewing plans for a U.S. listing.

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Other major markets also posted gains:

• Japan’s Nikkei 225 rose by 1%.
• Hong Kong’s Hang Seng Index advanced 1.5%.
• Australia’s S&P/ASX 200 edged up 0.3%.

China's Economy and Geopolitics Act as Headwinds

Investor optimism was tempered by fresh data from China showing a slowdown in economic momentum. The country’s gross domestic product (GDP) grew 4.3% year-over-year in the second quarter, missing forecasts of 4.5% and decelerating from the first quarter's 5.0% growth.

While June's industrial output and retail sales figures topped estimates, a steep 18% decline in property investment underscored persistent weakness in the critical real estate sector. In response, mainland Chinese markets lagged, with the Shanghai Composite and CSI 300 indexes each closing down about 0.3%. Geopolitical concerns also weighed on sentiment, as President Donald Trump's warnings of further military action against Iran kept oil prices near one-month highs, renewing concerns that higher energy costs could eventually rekindle inflation.