A political earthquake in Tokyo has unleashed a torrent of investor optimism, sending Japanese stocks soaring by the most in months and adding powerful fuel to a global rally that is already firing on all cylinders.
From stocks and gold to Bitcoin, a powerful “risk-on” wave is sweeping through the markets, a rally built on the potent cocktail of a dovish Federal Reserve and the promise of a fresh stimulus boom in the world’s fourth-largest economy.
A bet on a new beginning in Tokyo
The catalyst for the market’s explosive move was a stunning political development in Japan. Over the weekend, the pro-stimulus lawmaker Sanae Takaichi emerged as the frontrunner to become the country’s next prime minister.
The news sent the Nikkei 225 index jumping more than 4 percent, its biggest one-day gain since April, while the Japanese yen weakened 1.5 percent against the dollar, a classic market reaction to the prospect of looser fiscal policy.
Investors are betting that Takaichi, who has previously favored stimulus measures, will unleash a new wave of government spending to bolster the economy.
Her ascent has also raised concerns about Japan’s bond supply and has reduced the chances of a Bank of Japan rate hike this month, a perfect recipe for a stock market rally.
The unstoppable rally gathers force
This powerful Japanese catalyst is landing in a market that was already primed for a rally. The MSCI’s gauge of Asian shares has climbed for a sixth consecutive day, propelling the index to a new record.
This follows a strong session on Wall Street, where a weak US jobs report has all but cemented the case for another Federal Reserve interest rate cut in October.
The bullish sentiment is not confined to stocks. Gold has surged above $3,900 an ounce to yet another all-time high, while Bitcoin also set a new record over the weekend.
The message from the market is clear: a new era of looser monetary policy is coming, and investors are positioning for the ride.
The AI train and the Indian anomaly
The seemingly unstoppable AI theme is also providing a powerful undercurrent of support.
Hon Hai Precision Industry Co., a major server production partner for the AI kingpin Nvidia, reported an 11 percent growth in quarterly sales, a clear signal that the demand for AI infrastructure remains white-hot.
In a more muted and cautious start, the Indian market has opened the week on a slightly positive note amid these mixed global cues.
The 30-share BSE Sensex gained 67.62 points to start the session at 81,274.79, while the Nifty gained 22.3 points to open at 24,916.55.
As a new and volatile week begins, Dalal Street is navigating a complex world of political earthquakes, central bank pivots, and the enduring power of a technological revolution.
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