Nikkei Rises Further as Asian Markets See More Gains

The Nikkei rose to another record on Tuesday, while markets across Asia also saw gains after a rally on Wall Street.

Stocks in Japan jumped another 2.3% following Prime Minister Sanae Takaichi’s stunning election win.

Thai stocks were also up 3.5% on Tuesday, after Anutin Charnvirakul’s election triumph on the same day. Foreigners bought over $530 million worth of shares on Monday, according to the Bangkok Post, which said this was the biggest inflow in four years and made it the best performer in Southeast Asia.

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Gains across world markets have brought some calm to trading floors after last week’s asset-wide rollercoaster ride, with tech firms battered by AI spending fears finding their feet.

Foreign investors sold more than $9.79 billion worth of stocks last week, according to LSEG data for stock markets in South Korea, Taiwan, Thailand, India, Indonesia, Vietnam and the Philippines.

Most of that money was divested from stocks in South Korea and Taiwan, but close to $900 million was invested in Indian stocks after news that the US had agreed to a trade deal with New Delhi, and cut tariffs from 50% to 18%.

Investors were also gearing up for the release of key US data this week, hoping for fresh insight into the world’s biggest economy and an idea about the Federal Reserve’s plans for interest rates.

Forex reserve gains could help fund food tax cut

Takaichi’s landslide lower-house election win paves the way for increased fiscal stimulus and massive tax cuts.

Tech firms, which have been a key driver of the Nikkei’s surge over the past year to multiple record highs, led the way again with investment giant SoftBank piling on more than 10%, while Tokyo Electron, Sony and Advantest were also sharply higher.

Japan’s finance minister Satsuki Katayama said on Tuesday that using surplus from $1.4 trillion foreign currency reserves could be considered when officials discuss funding sources for planned cuts to the food sales tax.

She told a press conference that such surplus had been transferred to the general account in the past.

However, Nozomi Moriya of UBS Securities warned PM Takaichi had to meet expectations.

“As the market is already starting to price in expectations before they actually materialise, whether such hopes will be realised and then surpassed is something that will need to be monitored,” she wrote.

“The Takaichi administration now needs to make some critical decisions, including whether to prioritise economic policy in addition to security measures, and whether to prioritise growth as well as focus on such measures as cutting consumption tax on food.”

There were also gains in Hong Kong, Seoul, Shanghai, Singapore, Taipei, Manila, Mumbai, Bangkok, Jakarta and Wellington.

The Hang Seng Index in Hong Kong was up 0.6% to 27,183.15 at the close, while the Shanghai Composite was up 0.1% at 4,128.37 at the end of trading.

The S&P BSE Sensex in Mumbai was also up 0.17%.

London and Frankfurt dipped at the opening of trading, but Paris edged up.

Concerns remain re huge AI spending

Sentiment was given a lift by another strong day on Wall Street, where Magnificent Seven members Microsoft, Meta and Nvidia led the charge.

However, investors remain concerned about the vast sums of cash pumped into the artificial intelligence sector, with questions being asked about when profits will be realised, if at all.

“Several big tech results have revived investor concerns about huge spending, with Amazon, Google, Meta, and Microsoft collectively expected to spend around $650 billion in the race to win AI dominance,” said City Index senior market analyst Fiona Cincotta.

Attention also turns to the macro outlook this week, with Washington due to release key non-farm payrolls figures on Wednesday, having been delayed from Friday owing to a brief government shutdown.

Closely-watched inflation and retail sales figures are also lined up for release.

The readings come amid signs of weakness in the US labour market, with President Donald Trump’s top economic adviser Kevin Hassett warning of more soft readings to come.

“I think that you should expect slightly smaller job numbers that are consistent with high GDP growth right now,” he told CNBC on Monday.

“One shouldn’t panic if you see a sequence of numbers that are lower than you’re used to, because, again, population growth is going down and productivity growth is skyrocketing.”