Asian Benchmarks Mostly Higher as Japan's Election Sparks Rally
Asian shares were predominantly higher on Tuesday, with Japan's benchmark Nikkei 225 leading the charge by surging to new record highs. This rally followed a historic parliamentary election victory for Sanae Takaichi's political party, marking a significant milestone as she becomes the nation's first female prime minister.
The Nikkei 225 jumped 2.6% to 57,821.58, building on a 3.9% leap to a record high the previous day. Investor optimism is running high, with expectations that Prime Minister Takaichi will implement economic reforms aimed at boosting both the economy and the stock market.
Regional Market Performance
Across the Asia-Pacific region, other key indices also posted gains. Australia's S&P/ASX 200 rose 0.3% to 8,893.60, while South Korea's Kospi gained 0.6% to 5,327.80. In Greater China, Hong Kong's Hang Seng surged 1.0% to 27,300.00, and the Shanghai Composite added a modest 0.2% to 4,130.20.
U.S. Market Context and Concerns
On Wall Street, the U.S. stock market was coming off its best trading day since May, closing the previous week on a strong note. However, several underlying concerns continue to loom over the market. Critics argue that stocks have become excessively expensive following their recent run to record levels.
The S&P 500 gained 0.5% to 6,964.82, pulling closer to its all-time high set two weeks earlier. The Dow Jones Industrial Average edged up less than 0.1% to 50,135.87, and the Nasdaq composite advanced 0.9% to 23,238.67, driven in part by gains in technology stocks.
AI Investment Worries and Bond Market Stability
A persistent worry in the market revolves around whether massive investments by Big Tech and other companies in artificial-intelligence technology will yield sufficient profits to justify the expenditures. On Monday, some of the beneficiaries of this AI rush helped propel the market higher, with chip companies like Nvidia rising 2.4% and Broadcom up 3.3%.
In the bond market, Treasury yields held relatively steady ahead of potentially market-moving reports scheduled for later in the week. The U.S. government is set to release the latest monthly update on the job market on Wednesday, followed by the consumer-level inflation reading on Friday.
Federal Reserve and Economic Indicators
These reports could significantly influence expectations for the Federal Reserve's interest rate decisions. The Fed has currently paused its rate cuts, but a weakening job market might prompt a quicker resumption of reductions. Conversely, persistently high inflation could lead to a prolonged hold on rate adjustments.
One factor keeping U.S. stocks near record levels is the anticipation that the Fed will continue cutting interest rates later this year. While lower rates can stimulate economic growth, they also carry the risk of exacerbating inflationary pressures.
Commodities and Currency Movements
In commodity markets, gold rose 2% to settle at $5,079.40 per ounce, following volatile swings after roughly doubling in price over the past 12 months. Silver, experiencing even wilder price fluctuations, jumped 6.9% on Monday. Bitcoin hovered just below $71,000 after briefly surpassing that level over the weekend, having dropped close to $60,000 last week.
In early Tuesday trading, benchmark U.S. crude slipped 4 cents to $64.32 a barrel, while Brent crude, the international standard, dipped 2 cents to $69.02 a barrel. Currency markets saw the U.S. dollar edge down to 155.75 Japanese yen from 155.83 yen, and the euro fell slightly to $1.1909 from $1.1916.
AP Business Writer Stan Choe contributed to this report. Yuri Kageyama is active on Threads.
