Hang Seng Tech Index surges 2% as US inflation data soothes rate fears

The Hang Seng Tech Index rose 2% to 4,835.74 on Wednesday, tracking a regional tech rally after softer-than-expected US inflation data reduced bets on a near-term rate hike.

"The softer inflation data is likely to be welcomed by Federal Reserve officials, reducing the immediate pressure for further rate hikes," said Fiona Cincotta, senior market analyst at City Index. "However, the recent rebound in oil prices and renewed US-Iran tensions could yet complicate the inflation outlook if higher energy costs persist."

The broader Hang Seng Index added 1.4% to 24,618.10, while the Shanghai Composite dipped 0.3% to 3,955.58. The rally in Hong Kong mirrored gains across Asia, with Seoul's Kospi surging 6.2% and Tokyo's Nikkei 225 rising 1.5%. Chipmaker SK hynix, a bellwether for the tech sector, jumped more than 3% after a 15% collapse the prior session, while Samsung Electronics rose 3.3%. In the US, banking giants JP Morgan, Citigroup, Bank of America, Goldman Sachs and Wells Fargo all reported higher quarterly profits, lifting sentiment across global equity markets.

The move came as US consumer prices rose 3.5% in June, down from May's three-year high of 4.2% and below the 3.8% consensus estimate, paring expectations for a Federal Reserve rate hike this month. The dollar weakened against major peers on the reduced rate-hike bets, with the euro at $1.1416 and the yen at 162.41 per dollar. Still, Fed Chair Kevin Warsh cautioned that "there's plenty of work to do" during a House Financial Services Committee hearing, while oil prices extended gains — Brent crude rose 1.1% to $85.63 a barrel — as American forces launched fresh strikes on Iranian sites.

The divergence between US and Asian equity markets has been driven mainly by technology stocks, which are outperforming again, noted Ipek Ozkardeskaya, analyst at Swissquote Bank. The tech-heavy HSTECH has been a direct beneficiary of the rotation back into growth names, though the sustainability of the rally hinges on whether inflation continues to moderate and the US-Iran conflict does not trigger a fresh energy price shock. SPI Asset Management's Stephen Innes noted that markets still price at least one rate hike this year, with some chance of a second, so "the tightening story has not disappeared." Investors are now looking ahead to Fed Chair Warsh's continued congressional testimony and the next batch of US economic data for further direction on the rate path.

This article is for informational purposes only and does not constitute investment advice.