Japanese and South Korean stock markets opened high but closed lower; the Kospi index fell 2%, and the yen fell below the 162 mark for the first time in forty years.

Japanese and South Korean stock markets opened high but closed lower; the Kospi index fell 2%, and the yen fell below the 162 mark for the first time in forty years.

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Asia-Pacific stock markets opened higher led by technology stocks but quickly plunged; the yen fell below its lowest level since 1986, and the market remains highly vigilant about possible intervention by Japanese authorities.

On Tuesday, Japan's Nikkei 225 Index opened up more than 1.4%, then turned to a decline of 0.2%. South Korea's Kospi Index opened up 1.17%, following Wall Street's overnight rally, but then expanded its intraday decline to 2%.

However, the yen against the dollar fell below the 162.00 mark for the first time in forty years, benefiting exporters but also increasing pressure on Japan's import costs.

The MSCI Asia-Pacific Index rose as much as 0.5%; the index has already risen 20% before the last trading day of the quarter and is set for its best quarterly performance in 17 years. Investors are now focusing on the resumption of US-Iran negotiations on Tuesday and US June employment data on Thursday, seeking more clues for the Federal Reserve’s rate trajectory.

Tech stocks lift Asia-Pacific markets to a high opening

Asia-Pacific stock markets generally opened higher on Tuesday, continuing the overnight rally from Wall Street. The Nikkei 225 Index opened up more than 1.4%, Topix rose 0.88%; Kospi opened up 1.17% while small-cap Kosdaq fell 0.88%; Australia’s S&P/ASX 200 Index was basically flat.

Subsequently, the Nikkei 225 Index turned to decline by 0.2%. Seoul’s Kospi expanded its intraday loss to 2%; SK Hynix fell nearly 3%; Samsung Electronics dropped 0.15%, after earlier rising nearly 4%.

Previously, US stock markets rebounded sharply on Monday, led by chip stocks pushing the S&P 500 Index up 1.18% and the Nasdaq Composite up 2.07%. The Dow Jones Industrial Average rose 306.63 points, closing above 52,000—a record high; Alphabet jumped nearly 5% on its first trading day as a new Dow Jones member.

Eased US-Iran tensions were a key catalyst for this rebound. The US and Iran reached an agreement Sunday to stop mutual attacks and allow commercial ships free passage through the Strait of Hormuz. Trump said the two sides would resume peace talks in Doha on Tuesday.

Yen falls to forty-year lows, risk of intervention rises

The continued weakness of the yen is one of the most closely watched risks in the market. The yen-dollar exchange rate has fallen below the 1986 level. Bloomberg market strategist Mark Cranfield noted that according to 1986 price data, the 164-165 range will be the next focus for forex traders; if yen depreciation accelerates, the market will expect Japanese authorities to intervene by buying yen.

On June 16, the Bank of Japan raised its benchmark interest rate to 1%, the highest since 1995, but the market reaction was limited. The reason is traders expect the Federal Reserve to maintain a hawkish stance, and the US-Japan rate gap remains significant.

Yen depreciation has a dual effect: it boosts export profits, helping Japan’s stock market hit record highs, but also raises import costs, eroding real purchasing power for residents and increasing political pressure on the government.

Domestically in the US, the Supreme Court ruled that Fed Governor Lisa Cook can temporarily remain, strengthening market confidence in the Fed's independence; the US bond market remains stable. Michael Reynolds of Glenmede asset management said, "If the Fed is perceived as being influenced by political orders, US dollar assets could face a sustained risk premium increase. Eliminating this tail risk—even though the market previously priced it very low—is a subtle but meaningful positive signal for the stability of long-term rates outlook."

In tech stocks, Matt Maley of Miller Tabak said the rally in the tech sector is a positive sign for the bulls, and it will remain a core driving force for the market. He also cautioned that tech stocks don’t need to consistently outperform the overall market, but must avoid significant declines, or individual investors might turn to cash amid persistent bubble concerns.

Julian Emanuel, Senior Managing Director at Evercore ISI, is optimistic about leading tech stocks, believing that after entering earnings season, large tech stocks are likely to see style rotation and position rebuilding; the “Magnificent Seven” are now trading at subdued valuations, offering good upside potential.

In commodities, US crude oil continues its gains, trading near $70.15 per barrel; gold fluctuates slightly, at about $4,015 per ounce; the dollar softens slightly, and US bond yields are basically flat. The next important window for the market is the US June non-farm payrolls data to be released Thursday, which will provide key guidance for the Federal Reserve’s next policy move.

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