Asia Stocks Rally as Softer US Inflation Data Dials Back Fed Hike Bets

Here’s your quick read to start the day: a chatty, no-fuss look at overnight moves, the big story, what’s on the docket, and the tickers you need to watch.

US Fed

Federal Reserve Chair Kevin Warsh.

By Richard Fargose

July 15, 2026 at 2:30 AM IST

Global Mood: Cautiously Risk-On
Drivers: Iran Blockade Reinstated, Lebanon Talks, Ukraine Drone Blitz, Lower US CPI data

Asia-Pacific markets opened sharply higher on Wednesday, buoyed by a cooler-than-expected US inflation report that bolstered hopes the Federal Reserve may not need to raise interest rates as aggressively this year. South Korea's Kospi surged 6.3% at the open, and the small-cap Kosdaq gained 4%, while Japan's Nikkei 225 and Topix each added 0.9% and Australia's ASX 200 rose 0.6%.

The June consumer price index fell 0.4% month-on-month, bringing annual inflation to 3.5%, well below economist expectations of a 0.2% decline and 3.8% annual rate. The softer print prompted traders to sharply scale back near-term Fed tightening bets, with the probability of a July rate hike tumbling to 17% from 42% a day earlier, though markets continue to price in a hike later in the year with a 63% chance of rates rising by a quarter- or half-percentage point following the September meeting. US stock futures were little changed overnight after Wall Street's inflation-driven rally, with Dow, S&P 500, and Nasdaq futures all hovering near the flatline.

THE BIG STORY
Trump reimposed a naval blockade of all Iranian ports Tuesday and threatened to strike power plants and bridges "next week" unless Tehran returns to negotiations — a significant escalation that raised the spectre of attacks on civilian infrastructure potentially in violation of the Geneva Conventions. The US simultaneously launched fresh strikes on Iranian capabilities in the Strait of Hormuz, which Tehran again declared closed, as oil prices climbed to their highest since mid-June. Iran dismissed the notion that US military pressure would bring it back to the table, leaving the diplomatic path effectively blocked. Trump's ultimatum — negotiate or face energy and civilian infrastructure strikes — sets up a potentially decisive week for the conflict's trajectory.

Against that backdrop, Lebanon and Israel held US-brokered talks in Rome aimed at moving their framework agreement into implementation, with Beirut hoping to secure a gradual Israeli withdrawal from southern Lebanon. A State Department official called the talks positive, though expectations for swift progress were low given the renewed US-Iran hostilities straining the broader regional accord. In Ukraine, Kyiv launched its largest drone offensive on Moscow in recent memory — 340 drones dispatched toward the capital over 24 hours — while also striking the Salavat petrochemical complex in the Urals and the Afipsky refinery in southern Russia, deepening fuel shortages across the country. Russia responded with continued missile and drone attacks on Kyiv, keeping both fronts in a state of active escalation.

Data Spotlight
Fed Chair Kevin Warsh reaffirmed the Fed's commitment to restoring price stability, expressing zero tolerance for persistently elevated inflation while noting the US economy continues to expand at a solid pace. Business investment emerged as the standout strength, driven by data centre construction and AI-related demand, while household consumption grew moderately and manufacturing output rose steadily. On the labour market, Warsh noted job creation has kept pace with workforce growth, with unemployment remaining low and nominal wages posting solid gains.

US annual inflation fell sharply to 3.5% in June from 4.2% in May, the first decline in five months and below forecasts of 3.8%, as the US-Iran ceasefire significantly eased energy price pressures. Energy costs rose 15.7% annually, well below May's 23.5%, while core inflation eased to 2.6% from 2.9%, also below forecasts. Month-on-month, consumer prices fell 0.4%, the largest monthly decline since April 2020, driven by a 5.7% drop in energy prices.

Takeaway: June's inflation print marks a meaningful turning point, with the US-Iran ceasefire delivering the energy price relief needed to pull headline CPI sharply lower and core inflation closer to the Fed's 2% target. While Warsh's hawkish tone signals the Fed will not declare victory prematurely, the data materially reduces the case for near-term rate hikes and opens the door to a more balanced policy discussion in the second half of 2026.

WHAT HAPPENED OVERNIGHT

US stocks rise as cooler CPI and strong bank earnings offset West asia tensions

The S&P 500 gained 0.38% and Nasdaq rose 0.90%, led by chip stocks and solid bank results, while the Dow edged up 0.02%.
June CPI undershot consensus on easing energy prices, pushing Fed hold odds at the July meeting to 83.4% from 58.3% on Monday.
Goldman Sachs surged 9% on a blowout Q2; JPMorgan and Bank of America rose 2.5% and 1.9% on consensus beats; Citigroup fell 5.3% on expense concerns; Wells Fargo dropped 2.7%.
IBM tumbled 25.2% after warning Q2 revenue would miss estimates.
Markets still price at least one 25bps Fed hike by year-end despite the softer inflation print.

US Treasury yields retreat from two-month highs as softer CPI trims rate hike bets

The 10-year yield fell ~6bps to 4.57%, pulling back from Monday's two-month high of 4.62%, as below-forecast CPI reduced Fed tightening expectations.
Headline CPI came in at 3.5% and core at 2.6%, both below forecasts, with monthly CPI falling 0.4% as the Iran ceasefire weighed on energy prices.
September Fed hike odds fell to ~60% from ~70% the prior day following the data release.
The 2-year Treasury yield dropped as much as 14bps to 4.14%, on track for its biggest one-day decline since February.

US Dollar falls over 0.5% as softer-than-expected CPI trims Fed rate hike bets

The dollar index dropped to ~100.7 after June CPI slowed to 3.5% from 4.2% in May, below the 3.8% forecast, as lower energy prices eased overall price pressures.
Core inflation moderated to 2.6% and monthly CPI fell 0.4%, the first monthly decline since 2020, offsetting Warsh's hawkish congressional testimony.
Warsh stressed the Fed has no tolerance for persistently elevated inflation and reaffirmed its commitment to restoring price stability.
Renewed geopolitical tensions limited the dollar's decline as the US resumed Iran strikes, reinstated the naval blockade, and Tehran launched fresh attacks on Hormuz shipping.

Oil climbs 2% to one-month high as US reimposed naval blockade tightens Hormuz supply

Brent settled at $84.73 per barrel, up 1.7%, and WTI at $79.34, up 1.5%, with Brent in technically overbought territory for a second straight day for the first time since March.
Trump dropped the proposed 20% Hormuz security fee, saying he would seek investment deals with Gulf states instead, briefly pushing crude futures negative before prices recovered.
Iranian cruise missiles struck two Emirati oil tankers, killing one Indian crew member and wounding eight others, reigniting fears the June MOU will not lead to a permanent peace.
US diesel futures are up 21% in July versus 14% for crude, pushing 3-2-1 and diesel crack spreads to record highs on Russian export curbs following Ukrainian refinery strikes.
Ukraine struck two Russian oil refineries in Bashkortostan and Krasnodar overnight, extending its campaign on Russian energy infrastructure.
Warsh vowed to "do my job" if challenged by Trump, who has called for rate cuts, reinforcing the Fed's independence amid ongoing inflation concerns.
Analysts estimate US crude stocks fell 2.7 million barrels last week, which would mark the 13th draw in 14 weeks, with the EIA's official report due Wednesday.

Day’s Ledger*

Economic Data

China April-June GDP data
India May BoP Data
Eurozone May Industrial Production Data
US June PPI data
US Weekly crude oil inventories data

Corporate Actions

Earnings: Angel One, Fedbank Financial Services, HDB Financial Services, HDFC AMC, HDFC Life Insurance Company, ICICI Lombard General Insurance Co, Jana Small Finance Bank, Network18 Media & Investments, Reliance Industrial Infrastructure, Union Bank of India, Mangalore Refinery and Petrochemicals
Angel One to consider dividend

Policy

BoE MPC Member Pill Speaks
FOMC Member Williams Speaks
German Buba President Nagel Speaks
Fed Governor Cook Speaks

Tickers to Watch

TATA ELXSI: April-June net profit at 1.706 billion rupees, up 18.2% YoY.
L&T TECHNOLOGY SERVICES: June-quarter revenue, margins and constant currency growth slightly ahead of estimates; profit largely in line with expectations.
ANAND RATHI SHARES & STOCK BROKERS: FY27 starts steady with robust growth in lending and wealth management; net profit up a modest 2.2% YoY, backed by strong net interest income, margin funding and AUM growth.
DELHIVERY: RBI approves Certificate of Registration for wholly owned subsidiary Delhivery Financial Services as a Type II NBFC-ND.
HERO MOTOCORP: Committee of Directors approves additional investment of up to 10 billion rupees in associate company Ather Energy via preferential allotment of equity/convertible securities.
KIRLOSKAR BROTHERS: Wholly owned subsidiary SPP Pumps UK secures international order worth GBP 11.67 million (1.4959 billion rupees) from Saipem Offshore Construction for vertical pumps and spares.
IT STOCKS: In focus after IBM's weak preliminary Q2 results triggered its biggest stock decline in nearly six decades; Infosys and Wipro ADRs also decline in US trading.
JAMMU AND KASHMIR BANK: To sell 0.5% stake in PNB MetLife India Insurance to MetLife International Holdings for 1.201 billion rupees.
IOL CHEMICALS AND PHARMACEUTICALS: Clopidogrel Bisulfate API receives approval from China's NMPA Centre for Drug Evaluation.
EASY TRIP PLANNERS: EaseMyTrip signs MoU with Department of Tourism, Government of Jharkhand, to promote the state's tourism offerings via digital initiatives.
JAIN RESOURCE RECYCLING: Furnace explosion at Tamil Nadu manufacturing facility kills one labourer, injures several others; operations in the affected section temporarily suspended.
NBCC (INDIA): Board approves scheme of arrangement to merge wholly owned subsidiary HSCC (India) with the company on a going-concern basis.
IDBI BANK: Unable to confirm or deny media report of government nearing acceptance of a revised bid from Fairfax Financial, citing confidentiality of the ongoing strategic disinvestment process.

Must Read

(*Compiled from various media sources)

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