Asian equities staged a partial recovery on Tuesday, with Japan's Nikkei 225 climbing 0.9% and South Korea's KOSPI surging 3.4%, as a de-escalation in Middle East tensions prompted investors to buy back into battered risk assets. The rebound follows Monday's circuit-breaker chaos, when forced selling and stretched valuations triggered an 8%-plus plunge in Seoul's benchmark index.
The bounce was most pronounced in markets that suffered the steepest losses a day earlier. South Korea's chip-heavy index led the charge as traders returned to semiconductor names, reversing some of the panic-driven exodus. However, the move appears tactical rather than a durable shift in sentiment. Wall Street's modest overnight gains were built on weak breadth, with most S&P 500 constituents finishing lower even as the index edged up. Futures for U.S. and European shares remained subdued in Asian trading, signaling that investors are still reluctant to chase the rally while bond yields stay elevated and shipping disruptions through the Strait of Hormuz persist.
Risk Appetite Returns, but Only at the Margin
The KOSPI's 3.4% advance clawed back only a fraction of Monday's rout, when forced selling and stretched valuations collided with renewed anxiety over chip demand. The market had been among the world's strongest performers before the selloff, leaving retail investors exposed through leveraged positions. Japan's Nikkei 225 added 0.9% after dropping 3.9% in the prior session, while MSCI's broadest gauge of Asia-Pacific shares outside Japan rose 1.5%.
China's blue-chip index edged up 0.4% after trade data showed exports surging 19.4% in May and imports climbing 27.4%, both beating expectations. The figures underscore resilience in China's external sector, even as domestic demand remains uneven and U.S. tariffs continue to reshape trade flows. For investors eyeing export-driven plays, the data supports a tactical tilt toward Chinese exporters, though the sustainability of the rebound hinges on global trade normalization.
The rebound was not uniform. Euro Stoxx 50 and DAX futures slipped 0.4%, while FTSE futures fell 0.2%. S&P 500 and Nasdaq futures were little changed after Monday's modest gains. Investors are now looking to Oracle's earnings on Wednesday for the next read on whether artificial intelligence spending can keep supporting large-cap technology valuations. The recent selloff has drawn bargain hunters into names like Nvidia, which rebounded 2% on South Korea AI deals, with its CEO calling the selloff a discount. Similarly, Tesla rebounded 3% on a JPMorgan upgrade and strong China sales.
Oil Eases as Dollar Holds Firm
In commodities, Brent crude fell 0.7% to $93.57 a barrel after touching $98 overnight, while U.S. crude slipped 0.7% to $90.62. The retreat came after Israel and Iran signaled a pause in attacks, giving oil markets some breathing room. However, the supply buffer remains thin: U.S. crude stocks plunged 8 million barrels last week, and ING has warned of Q3 price spikes if the Strait of Hormuz disruption persists. Gold held near $4,334 an ounce, above Monday's two-month low of $4,268.39, as traders weighed geopolitical risks against a firm dollar.
In currencies, the dollar stayed firm at 160.17 yen, close to Monday's high of 160.395. Traders remain alert to the risk of Japanese intervention if the yen weakens beyond April's 160.725 level. The euro hovered near a nine-week low at $1.1538, while sterling recovered slightly to $1.3347.
The broader market narrative remains one of caution. While the tactical bounce offers short-term relief, elevated bond yields, disrupted shipping lanes, and lingering chip demand concerns suggest that a sustained recovery is far from assured. Investors are advised to monitor key earnings and geopolitical developments closely.
This article is for informational purposes only and does not constitute financial advice.
