Asian markets surge on Monday
Asian markets surged on Monday, led by a 4.1 per cent jump in Japan’s Nikkei to record highs, after a decisive election win for Japanese Prime Minister Sanae Takaichi fuelled expectations of expansionary fiscal policy and tax cuts, while a late rebound in US chip stocks eased global risk aversion.
Investor sentiment was further supported by bargain hunting in beaten-down assets, including silver, and growing bets that the US Federal Reserve could begin cutting interest rates by June. Markets are now focused on a heavy slate of US economic data this week, including jobs, inflation, and retail sales, which is expected to shape expectations for monetary easing.
Japan’s rally reflected optimism that Takaichi’s strong parliamentary majority would allow swift action on stimulus, artificial intelligence, semiconductors, and energy security. The prospect of increased borrowing, however, pushed two-year Japanese government bond yields to around 1.3 per cent, their highest level since 1996. Outside Japan, MSCI’s Asia Pacific index rose 2.1 per cent, South Korea’s tech-heavy market climbed 3.8 per cent, and China’s blue chip index gained 1.3 per cent ahead of inflation data due later this week.
European equity futures edged higher, while US futures extended gains after Wall Street’s sharp rebound on Friday, driven by a powerful rally in chipmakers. NVIDIA, AMD, and Broadcom each jumped around 7 to 8 per cent, helping the Dow Jones Industrial Average surge past the 50,000 mark. Despite the bounce, concerns linger over whether massive AI-related capital spending will deliver adequate returns, with the four largest U.S. tech firms alone planning about $650 billion in capital expenditure this year.
Currency markets were volatile as investors weighed fiscal expansion in Japan against Fed easing prospects. The dollar slipped against the yen to around 156.7 after profit taking, though analysts warned that any move toward 160 could prompt intervention from Tokyo. The euro edged higher, while sterling remained under pressure amid renewed political uncertainty in the UK.
Attribution: Reuters