Session wrap summary points:
- Australia’s headline CPI for May slowed to 4.0%, well below expectations of 4.3%, but average core inflation accelerated to 3.6% year-on-year, above estimates, keeping the odds of an RBA hike in August at around 36% and in December at 67%.
- The Australian dollar fell near 11-week lows and the New Zealand dollar remained at a seven-month low, as mixed CPI data and broadly stronger US dollar weighed on countercurrencies.
- Gold extended losses as markets continued to price in two or three rate hikes by the Fed over the next 12 months, with Fed Chair Warsh’s hawkish signals from last week’s Federal Open Market Committee meeting remaining the dominant narrative.
- The Bank of Japan’s June views summary showed some members calling for interest rates to be raised every few months to reach the neutral interest rate, with nearly 90% of economists now expecting another move by December, and the peak of the cycle revised to around 1.75%.
- Samsung jumped as much as 10% in early trading in Seoul on Yonhap’s report of a 90 trillion won stock buyback plan, with the South Korean government simultaneously signaling imminent announcements about a new batch of artificial intelligence chips with Samsung and SK Hynix. The gains faded as the morning progressed
- Morgan Stanley’s $7 billion private credit fund North Haven said it would pay less than half of redemption requests in the second quarter, capping exits at 5% as withdrawal requests reached 11.6% of shares.
- S&P Global has confirmed that Alphabet will replace Verizon in the Dow Jones Industrial Average before next week’s Monday open.
A split Australian inflation reading set the tone for Asia-Pacific markets on Wednesday, with headline CPI coming in below expectations but underlying measures accelerating, leaving the Reserve Bank of Australia’s policy path unresolved and the Australian dollar holding near 11-week lows. The kiwi fared no better, remaining at a seven-month low, as broad US dollar strength exacerbated pressure on counter currencies. Westpac maintained its call for a rate hike in August, arguing that second-round effects in the Middle East are rippling through consumer prices in ways that the headline misses, while markets settled on odds of 36% for August and 67% for December.
In Japan, the Bank of Japan’s June opinion summary confirmed that the majority of the bank’s board of directors was moving towards neutrality, with some members explicitly calling for interest rate hikes at intervals of every few months. Nearly 90% of economists now expect another move by December, and the expected cycle peak has been revised to around 1.75%. The yen remains near 40-year lows despite higher interest rates in June, keeping import cost pressures alive and hawks well-armed.
Seoul presented the sharpest price action during the session. Samsung stock rose as much as 10% early in the day thanks to a Yonhap report on a 90 trillion won buyback plan, which was boosted by the government’s confirmation of imminent announcements on a new AI semiconductor group with Samsung and SK Hynix. The gains faded as the morning progressed. Gold continued its decline, as Fed rate hike announcements continued to pressure, and Morgan Stanley’s North Haven private credit fund added to the headlines of increased liquidity in the sector by capping second-quarter redemptions at 5% against a drawdown call of 11.6%. Beyond macroeconomics, Alphabet will join the Dow Jones Industrial Average before Monday’s open, replacing Verizon.
Oil inventory data ahead of official data scheduled for Wednesday morning in the United States showed that the Strategic Oil Reserve is at its lowest level in more than 40 years.
