Updates at 05:02 GMT with RBA decision, latest price moves, and additional context
Investing.com– Asian stock markets rebounded sharply on Tuesday, with South Korea and Japan leading gains amid a rally in AI-related shares, and India jumping on a U.S trade deal, while the Reserve Bank of Australia raised interest rates as expected.
The rebound followed a firm finish on Wall Street overnight, with gains in technology and chipmaking stocks. Investors are awaiting key earnings this week, including from Amazon and Alphabet.
U.S. stock index futures edged higher during Asian hours on Tuesday.
RBA hikes rates as expected
Australia’s central bank raised interest rates on Tuesday, lifting its official cash rate by 25 basis points to 3.85%, the first increase since November 2023 as inflation pressures re-emerged.
The RBA board unanimously approved the rate hike, reversing part of last year’s easing cycle after inflation climbed above the central bank’s 2%–3% target band and economic activity remained resilient.
The move was widely anticipated by markets and economists.
Australia’s climbed 1.1%, remaining upbeat after the announcement, tracking broader regional gains.
In its statement, the RBA said inflation had picked up materially in the second half of 2025 and was likely to stay above target for some time, driven by strong private demand and capacity pressures, including tight labour market conditions.
Indian stocks surge on US trade deal
India’s surged as much as 5% at the time markets opened before paring some gains. U.S. President Donald Trump on Monday announced a trade deal with India, reducing tariffs on Indian goods to 18% from 50%.
The announcement followed months of negotiations during which punitive tariffs had risen as high as 50%, and was widely seen as a step toward normalising trade ties.
The deal reportedly entails India phasing out Russian oil purchases and expanding imports of U.S. energy and other goods.
jumps 5%, Nikkei climbs 3% on tech rally
Sentiment toward AI-related stocks has been volatile in recent sessions. Optimism around rapid adoption and strong long-term growth prospects had given way to sharp profit-taking after Microsoft’s (NASDAQ:MSFT) results highlighted heavy capital spending requirements, raising questions about margins in the near term.
However, Tuesday’s rally suggested investors were willing to look past short-term headwinds, betting that demand for AI infrastructure will continue to support chipmakers and technology suppliers.
Seoul’s KOSPI index surged nearly 6%, with heavyweight chipmakers (KS:005930) and (KS:000660) jumping between 7.5% and 8.5%.
Investors returned to AI-linked stocks on expectations that long-term demand for high-end memory and processors remains intact.
Japan’s index climbed more than 4%, buoyed by a broad rally in chipmakers and technology shares, and helped by a weaker yen.
Hong Kong’s index edged 0.3% higher.
In mainland China, the index gained 0.2%, while the rose 0.4%.
Singapore’s Straits Times Index added nearly 1%.