Key Takeaways

• Nikkei hits record above 70,000: Japan’s benchmark rose 0.5% to breach the historic milestone after the BOJ delivered its expected hike.
• BOJ hikes to 1%: The 25 basis point increase was widely anticipated; the central bank signaled readiness to hike further if inflation and growth progress as expected.
• BOJ tapers asset purchases: The central bank confirmed it will continue winding down purchases until April 2027.
• Iran war inflation a BOJ concern: Rising oil price risks were flagged as a key inflationary consideration.
• TOPIX slips 0.3%: The broader index lagged despite the Nikkei’s record high.
• KOSPI best performer: South Korea’s index rose 1.8% on sustained chipmaking and tech gains tracking Wall Street’s Monday surge.
• ASX 200 flat: Australia’s market barely moved after the RBA held rates at 4.35% as expected.
• RBA stays hawkish: The central bank signaled further hikes may be needed given sticky inflation and energy price risks.
• China data disappoints: Retail sales and fixed asset investment both shrank more than expected; the latter hit its weakest level since COVID-19.
• Industrial production a bright spot: China’s factory output rose slightly more than expected on strong overseas demand.
• Hang Seng worst performer: Hong Kong’s index fell over 1% on deep losses in internet and tech shares.
• S&P 500 futures dip 0.1%: U.S. markets pointed marginally lower ahead of the Fed meeting.
• Wall Street’s strong Monday lead-in: Stocks surged on Iran peace deal optimism and SpaceX’s continued post-IPO rally.
• Friday’s signing in focus: Markets remain fixated on the U.S.-Iran MOU signing and the Strait of Hormuz reopening.
• Singapore and India steady: STI rose 0.5%; Nifty 50 gained 0.5% after Monday’s 2% surge.

Asian stocks were a mixed bag on Tuesday, with Japanese markets hitting record highs after the Bank of Japan raised interest rates as expected.

Australian shares were little changed after the Reserve Bank of Australia kept rates on hold, as expected.

South Korean shares outperformed, aided by an extended rally in local chipmakers and tech stocks. Hong Kong and Chinese shares lagged following a round of weak economic prints from the mainland.

Regional markets took a positive lead-in from Wall Street, which clocked strong gains on Monday amid optimism over a U.S.-Iran peace deal, while SpaceX surged further after a stellar market debut on Friday.

S&P 500 futures fell 0.1% in Asian trade, with focus squarely on an upcoming Federal Reserve meeting.

Nikkei Hits Record High After BOJ Hikes Rates as Expected

Japan’s Nikkei 225 rose 0.5%, recovering from earlier losses to hit a record high of over 70,000 points, while the TOPIX fell 0.3%.

The BOJ hiked interest rates by 25 basis points to 1% as widely expected, and signaled it will continue to taper off its asset purchases until April 2027.

The move provided some hawkish signals to markets, especially given that the BOJ also said it was ready to hike rates further if inflation and the economy picked up as expected. A key point of concern was rising inflationary risks from higher oil prices.

The Nikkei was buoyed chiefly by continued gains in artificial intelligence and chipmaking stocks, which pushed higher after a stellar rally in the prior session.

ASX Flat After RBA Holds as Expected

Australia’s ASX 200 trimmed some early losses to trade flat after the Reserve Bank of Australia held interest rates steady at 4.35%, as expected.

Tuesday’s hold was widely telegraphed by the RBA after it hiked rates by a cumulative 75 basis points this year.

The RBA signaled that it planned to hike interest rates further if needed, especially in the face of increasingly sticky Australian inflation. Risks from rising energy prices also kept the RBA largely hawkish.

South Korea Buoyed by Tech; China Flat After Weak Data

South Korea’s KOSPI was the best performer in Asia, rising 1.8% on sustained gains in tech and chipmaking stocks — tracking robust overnight gains in U.S. peers.

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes were flat after mostly weak economic prints for May. Retail sales and fixed asset investment both shrank more than expected, with the latter hitting its weakest level since the COVID-19 crisis.

Industrial production was a bright spot, rising slightly more than expected on strong overseas demand.

Tuesday’s data showed the Chinese economy remained largely on the backfoot amid slowing domestic consumption and persistent uncertainty over the economic outlook.

Hong Kong’s Hang Seng index was the worst performer in Asia, falling over 1% on deep losses in local internet and technology shares.

Other Asian markets were mildly positive, steadying after logging strong gains in the prior session. Focus was squarely on the upcoming signing of the U.S.-Iran peace deal on Friday and the reopening of the Strait of Hormuz.

Singapore’s Straits Times Index rose 0.5%, while India’s Nifty 50 rose 0.5% after rallying nearly 2% in the prior session.