Asian Markets Slide as Tech Selloff Outweighs Wall Street Gains

Global Mood: Cautiously Risk-Off

Drivers: Ukraine Hits Siberian Refinery, OPEC+ Output Hike, Fed Hike Bets Ease 

Asian markets mostly declined on Tuesday as renewed selling in technology stocks offset the positive lead from Wall Street, while investors balanced easing global rate expectations against fresh concerns over AI valuations and geopolitical risks. 

South Korea's KOSPI slumped nearly 6% after heavy losses in semiconductor stocks, with Samsung Electronics falling more than 5% despite reporting strong earnings and SK Hynix dropping nearly 4% following the launch of its planned US listing process. Japan's Nikkei 225 fell more than 1%, weighed down by weakness in technology shares, while Australian and mainland Chinese equities also traded lower. Hong Kong's Hang Seng bucked the regional trend, extending gains for a fourth consecutive session.

Investors also continued to monitor geopolitical developments in Eastern Europe and West Asia, alongside expectations that easing energy prices could reduce pressure on global central banks. 

THE BIG STORY

Russia struck Kyiv and the surrounding region for the second time in days early Monday, killing at least 28 people and exposing a critical shortage of Patriot interceptors as Ukraine's military failed to down a single ballistic missile. The attack came on the eve of a NATO summit in Ankara where Trump is due to meet Zelenskiy, with the US president claiming a Ukraine peace resolution is "closer than people realise" after weekend calls with both Putin and Zelenskiy. Zelenskiy told the Financial Times he senses Trump is viewing the war in a new light following recent Ukrainian battlefield successes, though a Kremlin aide said the US position remained unchanged. Ukraine meanwhile struck Russia's largest oil refinery in Omsk, Siberia, in one of its deepest strikes of the war at roughly 2,700km from Ukrainian-held territory, continuing its campaign to degrade Russian energy infrastructure and fuel revenues.

China added a fresh layer of geopolitical tension by test-firing a missile from a nuclear-powered submarine into the Pacific on Monday, drawing concern from the US, Japan, Australia, New Zealand, and Taiwan. Beijing described the launch as routine annual training, with no specific target, but the timing — amid an already fraught global security environment — drew sharp criticism from regional powers. Australia and Japan said they received prior notification, while New Zealand called the test unwelcome, having been informed only hours before the launch.

Data Spotlight

The ISM Services PMI eased to 54.0 in June from 54.5 in May, matching expectations, as business activity and new orders softened modestly. Employment saw its largest increase since 2024, rising to 51.2 from 47.9, marking the first expansion in headcount since February, while price inflation eased to a four-month low.

The S&P Global US Services PMI was revised to 51.2 in June, the fastest expansion since before the West Asia energy shock, aided by FIFA World Cup tourism. Hiring declined for the third month in four as labour and fuel costs weighed, though business optimism for the year ahead remained intact.

The S&P Global US Composite PMI rose to 51.9 in June from 51.5 in May, below the preliminary estimate of 52.2. Employment fell for a second consecutive month, while input costs eased slightly but remained well above historical averages.

Takeaway: US services activity held up in June, supported by World Cup demand, but softening headline readings, persistent price pressures and a second consecutive month of job losses point to a gradually cooling economy with limited room for Federal Reserve easing.

WHAT HAPPENED OVERNIGHT

US stocks rally as AI chip optimism and earnings season hopes lift markets

• The S&P 500 gained 0.72%, Nasdaq rose 1.12%, and the Dow added 0.29%, with the S&P 500 now up 10% year-to-date and 1% below its June 2 record high.

• Broadcom jumped 3.7% after extending its custom chip supply deal with Apple through 2031, lifting the Philadelphia Semiconductor Index 2.2%.

• Analysts expect S&P 500 earnings to grow 24% year-over-year in Q2, with tech sector earnings projected to surge 65%, underpinning strong pre-earnings optimism.

• Microsoft fell 1% after announcing 4,800 job cuts, with markets interpreting the move as a sign of uncertain returns on AI capital spending.

• SpaceX dipped 1% with over $26 billion in shares traded ahead of its Nasdaq 100 inclusion on Tuesday.

• Traders now see a 25% chance of a Fed hike at the July 29 meeting following last week's cooler jobs report, with the June FOMC minutes due Wednesday.

• O'Reilly Automotive tumbled 6.7% after Bloomberg reported it sent a cash offer to acquire Genuine Parts, which fell 3%.

• ISM non-manufacturing PMI edged down to 54.0 in June, matching expectations, pointing to solid but slightly softer services activity.

US Treasury yields edge lower as softer data and easing oil prices temper rate hike bets

• The 10-year yield slipped to 4.48% as investors returned from the holiday weekend and digested softer economic data.

• ISM Services PMI pointed to a modest slowdown in services growth, with price pressures easing to their lowest since February, though employment rose by the most since late 2021.

• Oil prices retreating to pre-conflict levels helped ease inflation concerns, adding to the softening rate hike narrative.

• Markets now price a 56% probability of a Fed hike as early as September, down from 64% before last week's jobs report.

• FOMC minutes due later this week are the next key focus for clues on the Fed's policy outlook.

US Dollar edges higher but holds near three-week low after biggest weekly drop since April

• The dollar index traded around 101, steadying after last week's sharp decline triggered by the soft June payrolls report.

• Markets now price a 56% probability of a September Fed hike, down from 64% before the jobs report, keeping the dollar under pressure.

• Retreating oil prices to pre-conflict levels have eased inflation concerns, adding to the softer rate hike narrative.

• FOMC minutes due later this week are in focus for further clues on the Fed's policy outlook.

• The dollar posted its strongest gains against the yen on Monday, which remains near a 40-year low amid persistent intervention threat fears.

 

Oil settles near pre-war levels as Saudi price cuts and OPEC+ hike add to supply pressure

• Brent settled at $71.99/bbl (-0.2%) and WTI at $68.55 (-0.2%), both back near levels seen before the four-month Iran war began.

• Saudi Arabia set its Arab Light August OSP for Asia at $1.50/bbl below the Oman/Dubai average, the biggest monthly price cut in Reuters records dating back to 2003.

• OPEC+ agreed to raise output targets by 188,000 bpd from August, though analysts noted Gulf producers are effectively selling into a falling market with little hope of near-term price recovery.

• The UAE raised crude output to near-record highs above 3.8 million bpd in June after quitting OPEC to escape production caps, adding further supply.

• Trump renewed his threat to "finish the job" against Iran after indirect talks ended last week without public signs of progress toward a lasting peace deal.

• US SPR stocks fell 6.2 million barrels to 319.5 million barrels in the week ending July 3, the lowest level since April 1983.

• Ukraine struck Russia's largest oil refinery in Omsk alongside facilities in Yaroslavl and Leningrad regions overnight.

• Maersk and Hapag-Lloyd said they will resume some sailings through the Suez Canal, cutting Asia-Europe passage duration by four weeks.

Day’s Ledger* 

Economic Data

• German May Industrial Production (MoM)

• UK June Halifax House Price Index (YoY)

• UK June Mortgage Rate (GBP) 

• UK BoE Financial Stability Report

• US ADP Employment Change Weekly

• US May Exports 

• US May Imports 

Corporate Actions

• Orbit Exports Limited considering buyback

• Rashtriya Chemicals and Fertilisers Limited considering fundraising options

Policy

• BoE Gov Bailey Speaks

• BoE MPC Member Mann

Tickers to Watch

COCHIN SHIPYARD: Government launches OFS for up to 2.52% stake (5.04% with oversubscription option); non-retail investors July 7, retail investors July 8, 2026.

VARUN BEVERAGES: Kenya arm to acquire Devyani Food Industries Kenya's dairy beverages, juices and packaged water business for ₹3.05 billion to expand East Africa presence.

AVENUE SUPERMARTS (DMART): Issued commercial papers worth 3 billion rupees at 6.60% coupon, 85-day maturity ending September 29, 2026.

PRIMO CHEMICALS: Approved acquisition of remaining 51% stake in Flow Tech Chemicals, making it a wholly owned subsidiary.

DILIP BUILDCON: Received the provisional completion certificate for the Bengaluru-Vijayawada Expressway Package-7 HAM project, worth 7.80 billion rupees.

FRACTAL ANALYTICS: CFO Ashwath Bhat resigns.

TORRENT PHARMACEUTICALS: NCLT Ahmedabad sanctions amalgamation of J.B. Chemicals & Pharmaceuticals with Torrent Pharmaceuticals.

HEXAWARE TECHNOLOGIES: Partners with SmartRent to transform AI-native customer operations and revenue processes.

BLUE JET HEALTHCARE: QIP opens with floor price fixed at Rs 531.70/share; may offer up to 5% discount to floor price.

STANDARD ENGINEERING TECHNOLOGY: Approved phased acquisition of GL HAKKO Co. Ltd., Japan — initial 19.19% stake, further 31.88% within three years, taking total ownership to 51.07%.

Must Read

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Protection biz growth may cushion GST hit for life insurers in Q1 

Govt to sell 5% stake in Cochin Shipyard at ₹1,400 per share via OFS

(*Compiled from various media sources)

See you tomorrow with another edition of The Morning Edge.

Have a great trading day

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