Asia-Pacific markets traded mixed on Wednesday as investors weighed the implications of a ceasefire between Israel and Iran and the latest comments from the U.S. Federal Reserve. Australia’s S&P/ASX 200 index remained flat, closing at 8,559.2. South Korea’s Kospi climbed 0.15% to end at 3,108.25, while the small-cap Kosdaq fell 0.34% to 798.21. In Japan, the Nikkei 225 rose 0.39% to 38,942.07, while the Topix index closed flat at 2,782.24.
Hong Kong’s Hang Seng Index climbed 1.22% to 24,471.02, and mainland China’s CSI 300 rose 1.44% to 3,960.07. U.S. futures were near flat, with futures tied to the S&P 500 index and Dow Jones Industrial Average futures ticking down 0.1%. Federal Reserve Chair Jerome Powell stated on Tuesday that the Fed is committed to keeping inflation in check and would likely maintain current interest rates until there’s more clarity on economic conditions, particularly regarding tariffs and their impact on prices.
Overnight in the United States, the Dow Jones Industrial Average climbed 507.24 points, or 1.19%, to 43,089.02. The S&P 500 gained 1.11% to end at 6,092.18, while the Nasdaq Composite advanced 1.43%, settling at 19,912.53. Joerg Wuttke, partner at advisory firm DGA-Albright Stonebridge Group, emphasized that strong government demand is crucial for attracting European defense investments.
NATO Secretary-General Mark Rutte’s allocation of 3.5% of GDP for “hard defense” and 1.5% for broader security investments has been described as a “smart move” that is beneficial for the economy. The Reserve Bank of Australia is anticipated to cut its cash rate by 25 basis points to 3.6% in its July meeting, according to a note from the Commonwealth Bank of Australia.
Powell maintains Fed’s interest rate stance
The monthly consumer price inflation for May came in at 2.1%, below the 2.3% estimated by economists. The CBA economists also expect another 25 basis point rate cut in August. Shares of gaming firms rose after China’s gaming regulator approved 158 publishing licenses in June, the largest number this year.
Major companies such as Tencent and ByteDance benefited significantly, although the rise in Tencent shares was relatively modest. Australia’s monthly inflation rate dropped to 2.1% in May, its lowest level since October 2024. This figure was below expectations and marks a decline from the previous month’s rate.
The data revealed a softening in food and housing inflation, alongside declining transport prices. Oil prices climbed over 1% in early Asia trading hours Wednesday after two sessions of declines. U.S. West Texas Intermediate crude rose 1.34% to $65.23 per barrel, while the global benchmark Brent crude was up 1.28% at $68 per barrel.
China is taking steps to promote the use of the yuan by foreign institutions as international confidence in the U.S. dollar falters. Pantheon Macroeconomics senior U.S. economist Oliver Allen suggested that weakening labor market conditions could prompt the Federal Reserve to cut interest rates by September. Analysts at Piper Sandler noted that oil prices could decline further if the current range of $64 to $65 per barrel is breached.
