Asian stock markets posted strong gains on Tuesday, led by South Korea and Japan as enthusiasm around artificial intelligence stocks returned. Indian equities also surged after a U.S. trade agreement, while Australia’s central bank delivered a widely expected interest rate hike.
The rebound followed a solid close on Wall Street overnight, where technology and semiconductor stocks advanced. Investors are now looking ahead to major earnings releases later this week, including results from Amazon and Alphabet.
U.S. stock index futures edged slightly higher during Asian trading hours, adding to the positive regional mood.
RBA raises rates as inflation pressures build
The Reserve Bank of Australia raised interest rates by 25 basis points on Tuesday, lifting its benchmark cash rate to 3.85%. The move marked the first increase since November 2023, as inflation pressures resurfaced.
The rate hike was unanimously approved by the RBA board and partially reversed last year’s easing cycle. Inflation has moved back above the central bank’s 2%–3% target range, while economic activity and labor market conditions have remained resilient.
Markets and economists had broadly anticipated the decision. Australia’s S&P/ASX 200 climbed 1.1% and held onto gains after the announcement, tracking the wider rally across Asia.
In its policy statement, the RBA said inflation picked up notably in the second half of 2025 and was likely to remain elevated for some time, driven by strong private demand and ongoing capacity constraints.
Indian shares jump after US trade agreement
Indian equities surged after Donald Trump announced a trade deal with India on Monday. The agreement cuts U.S. tariffs on Indian goods to 18%, down from as high as 50% during months of tense negotiations.
India’s benchmark Nifty 50 jumped as much as 5% at the open before giving back part of its gains. The deal was widely seen as a step toward normalizing trade relations between the two countries.
Media reports said the agreement includes commitments from India to gradually phase out purchases of Russian oil while increasing imports of U.S. energy and other goods.
AI rally lifts South Korea and Japan
Sentiment toward AI-linked stocks has been volatile in recent sessions. Earlier optimism around rapid adoption and long-term growth had been shaken by profit-taking, after Microsoft’s earnings highlighted rising capital expenditure and near-term margin concerns.
Tuesday’s rally suggested investors were again focusing on the longer-term outlook, betting that demand for AI infrastructure will continue to support chipmakers and technology suppliers.
South Korea’s KOSPI surged nearly 6%, led by sharp gains in heavyweight chipmakers Samsung Electronics and SK Hynix, which jumped between 7.5% and 8.5%.
Japan’s Nikkei 225 climbed more than 4%, supported by a broad rally in technology stocks and a weaker yen.
Elsewhere in the region, Hong Kong’s Hang Seng Index edged up 0.3%. China’s CSI 300 gained 0.2%, while the Shanghai Composite added 0.4%. Singapore’s Straits Times Index rose nearly 1%.
