Japanese stocks reached new heights on Tuesday following the election of pro-stimulus advocate Sanae Takaichi to lead the ruling party, further fueling optimism in global markets. The Nikkei 225 index surged nearly five percent on Monday, driven by expectations that Takaichi will implement a robust monetary easing policy. The market continued its upward trajectory on Tuesday, closing marginally higher despite a slight pullback from earlier gains.
Takaichi’s anticipated rise to prime minister is seen as a pivotal moment for Japan’s economic direction. According to Charu Chanana of Saxo Markets, her victory “removes uncertainty about the country’s policy direction.” Chanana emphasized that Takaichi’s agenda is likely to maintain a combination of fiscal support and ultra-easy monetary policies. This continuity reassures investors that there will be no abrupt tightening and that coordination between the government and the Bank of Japan will remain intact.
The yen faced downward pressure as investors speculated on the potential for continued interest rate hikes by the Bank of Japan. In related market movements, yields on 30-year Japanese bonds reached their highest levels, reflecting concerns about the nation’s already substantial debt burden.
A recent partnership announcement between Advanced Micro Devices (AMD) and OpenAI to develop AI data centres further boosted market sentiment. This collaboration follows OpenAI’s earlier agreements with South Korean semiconductor companies, including Samsung and SK hynix, for critical components needed for its ambitious projects.
The technology sector has been at the forefront of this global market rally, with numerous markets achieving record highs this year. While some analysts raise concerns about the scale of investments in AI, Fidji Simo, Chief Operating Officer of OpenAI’s applications, assured that the surge in demand for computing power is not indicative of a bubble. She stated, “What I am seeing here is a massive investment in computing power… I really do not see that as a bubble. I see that as a new normal.”
Other global markets also experienced gains, with notable increases in Singapore, Wellington, Mumbai, Bangkok, Taipei, Manila, and Jakarta, alongside advancements in London and Frankfurt. Meanwhile, trading on the Hong Kong and Shanghai stock exchanges was suspended due to public holidays.
In France, the political landscape faced turbulence as Emmanuel Macron urged former Prime Minister Sebastien Lecornu to seek cross-party support for a new cabinet after his resignation just three weeks into the role. Lecornu’s cabinet faced backlash due to its resemblance to the previous administration, which had been criticized over a controversial austerity budget. Macron emphasized the need for political stability in light of current challenges.
The broad market gains coincided with record highs for the S&P 500 and Nasdaq in New York. Gold prices also surged, reaching a fresh peak of $3,977.44, drawing interest from investors amid the uncertainty surrounding the ongoing US government shutdown. As political negotiations in Washington remain stalled, with Republicans and Democrats struggling to reach an agreement, gold has emerged as a safe haven asset.
Analysts predict that the government shutdown could persist for several weeks before a resolution is reached. According to Rodrigo Catril of the National Australia Bank, the standoff is primarily due to disagreements over extending healthcare subsidies linked to the Affordable Care Act.
The positive market sentiment also propelled bitcoin to a record high of $126,251, further demonstrating the dynamic nature of current financial trends.
In summary, the election of Takaichi and subsequent market reactions underscore the interconnectedness of global financial markets, with Japan’s economic policies influencing investor sentiment worldwide.
