Asia stocks slide.
Asian stock markets fell on Thursday, with South Korean shares leading regional losses as a sharp selloff in semiconductor stocks and renewed concerns over U.S.-Iran tensions around the Strait of Hormuz dampened investor sentiment.
Traders awaited quarterly results from Taiwan Semiconductor Manufacturing Co (TSMC) (TW:2330) later in the day for cues on AI demand.
U.S. stock index futures were largely muted in Asian trading after Wall Street finished modestly higher overnight.
KOSPI slumps over 6% on chipmaker losses
South Korea’s KOSPI slumped more than 6%, triggering a brief trading halt, with heavyweight chipmakers SK Hynix (KS:000660) and Samsung Electronics (KS:005930) dropping between 8% and 11%.
In other news, the Bank of Korea raised its benchmark interest rate by 25 basis points to 2.75%, citing persistent inflationary pressures, rising household debt and resilience in the domestic economy.
Asian FX muted as weaker dollar offsets Iran jitters.
Most Asian currencies traded in narrow ranges on Thursday as weakness in the greenback was offset by persistent caution over the escalating conflict in the Middle East, leaving investors reluctant to take fresh positions in riskier regional assets.
The Middle East conflict intensified after the United States carried out a fifth consecutive day of strikes on Iranian military targets and Tehran reiterated that control of the Strait of Hormuz was central to its security, raising the prospect of further disruptions to global energy supplies.
The dollar, however, remained on the back foot after softer-than-expected U.S. consumer and producer inflation data reinforced expectations that the Federal Reserve will likely keep interest rates unchanged this month. The US Dollar Index was little changed near 100.5, holding close to its weakest level in nearly a month after falling sharply over the previous two sessions.
Gold extends losses.
Gold prices extended losses on Thursday as investors continued to look past softer U.S. inflation data and focused instead on the inflationary risks posed by higher oil prices, reinforcing expectations the Federal Reserve will remain cautious on interest rates.
At 02:02 ET (06:02 GMT), XAU/USD fell 0.74% to $4,030.32 an ounce, while Gold Futures declined 0.41% to $4,035.20. XAG/USD slipped 0.89% to $57.27 an ounce, while XPT/USD fell 0.64% to $1,667.02.
Softer inflation eases pressure on the Fed
U.S. producer prices unexpectedly fell 0.3% in June, versus expectations for no monthly change, following softer consumer inflation data earlier this week. The back-to-back reports reinforced signs that underlying price pressures were easing and reduced expectations of an imminent Federal Reserve rate increase.
However, investors largely looked through the backward-looking inflation data as renewed fighting in the Middle East pushed crude prices higher for a fourth straight session. The latest escalation has revived concerns that higher energy costs could feed into future inflation, potentially limiting the Federal Reserve’s scope to ease policy despite the recent cooling in price pressures.
That uncertainty has kept pressure on gold. While softer inflation would normally weaken the dollar and support bullion by reducing expectations for higher interest rates, renewed gains in oil have raised doubts about whether the recent disinflation trend can be sustained.
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