Key Takeaways
- Bank of Korea (BOK) raised its policy rate by 25 basis points to 2.75%, marking its first hike in over three years to combat persistent inflation and a weakening won.
- Japan's Nikkei 225 tumbled 2.9% to 66,777.46, led by a massive selloff in semiconductor giants like SK Hynix and Tokyo Electron amid cooling AI trade sentiment.
- Geopolitical risks surged as Iran claimed to shoot down a U.S. MQ-9 ‘Reaper’ drone over Khuzestan Province, driving oil prices higher and threatening shipping in the Strait of Hormuz.
- BHP (BHP) and Itochu (ITOCY) approved a $900 million investment for the Ministers North Iron Ore Project in Western Australia, targeting 20 million tonnes of annual output by 2028.
- U.S. Senate introduced a bipartisan bill to reduce pharmaceutical reliance on China, requiring stricter oversight of foreign investments in the domestic drug supply chain.
Monetary Policy and Regional Markets
The Bank of Korea delivered a widely anticipated 25-basis-point hike, bringing the benchmark seven-day repurchase rate to 2.75%. Governor Shin Hyun-song emphasized that the move was necessary as consumer inflation hit a two-and-a-half-year high of 3.2% in June, remaining well above the central bank's 2% target. Analysts expect at least one more hike by the end of 2026, as the BOK prioritizes price stability over growth concerns.
In Tokyo, the Nikkei 225 suffered a sharp decline, closing at 66,777.46. The selloff was primarily driven by a retreat in the artificial intelligence trade, with SK Hynix (000660) plunging over 8%. Japanese government bond (JGB) yields edged higher across the curve, with the 10-year yield advancing to 2.695% and the 20-year yield climbing 3.0 basis points to 3.565%, reflecting expectations of a prolonged period of higher interest rates.
Geopolitical Instability and Energy Impact
Conflict in the Middle East reached a new flashpoint following reports that Iran shot down an American MQ-9 ‘Reaper’ drone near Andimeshk. The incident has heightened fears regarding the security of the Strait of Hormuz, a critical artery for global oil transit. Oil prices extended a four-day rally as investors weighed the risk of direct U.S. military retaliation and potential disruptions to global supply chains.
Industrial and Legislative Developments
BHP Group (BHP), Itochu (ITOCY), and Mitsui & Co. (MITSY) reached a Final Investment Decision (FID) for the Ministers North Iron Ore Project. The $900 million development will serve as a satellite extension of the Yandi mine, with production scheduled to begin in the second half of 2028. The project is designed to sustain BHP’s medium-term production target of 305 million tonnes per annum.
In Washington, the Pharmaceutical Investment Oversight and Accountability Act was introduced by Senators Elizabeth Warren and Rick Scott. The bill seeks to curb U.S. reliance on Chinese pharmaceutical manufacturing by mandating the FTC and Department of Treasury to investigate the impact of foreign influence on the medical supply chain. The legislation reflects growing bipartisan concern over national security vulnerabilities in the healthcare sector.
Environmental Disruptions
In Hong Kong, the Education Bureau suspended all morning and whole-day classes following a red rainstorm warning. The Hong Kong Observatory recorded rainfall exceeding 50mm per hour, leading to widespread flooding in low-lying areas. The severe weather also forced the cancellation of the daily flag-raising ceremony at Golden Bauhinia Square.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.