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Asian Stocks Rise as Japan Rally, AI Optimism and Fed Outlook Shape Markets

Asian Stocks Rise as Japan Rally, AI Optimism and Fed Outlook Shape Markets. Source: Flickr

Asian stocks extended gains for a second straight session in early Tuesday trading, led by a powerful rally in Japan following Prime Minister Sanae Takaichi’s decisive election victory over the weekend. The result boosted investor confidence and pushed Tokyo’s benchmark index to new highs, reinforcing optimism across regional equity markets.

MSCI’s broad Asia-Pacific index excluding Japan advanced 0.4%, while the Nikkei 225 surged 2.1%, marking its third consecutive day of gains and setting a fresh record. Japanese equities were supported by expectations of policy continuity, corporate investment growth, and sustained momentum in technology-related sectors tied to artificial intelligence.

U.S. equity futures cooled slightly after a strong two-day rally on Wall Street. S&P 500 e-mini futures slipped 0.1%, partially retracing gains after the S&P 500 rose 0.5% and the Nasdaq Composite climbed 0.9% on Monday. Technology stocks rebounded as investors looked past last week’s AI-driven selloff and refocused on long-term growth prospects.

Market participants remain cautiously optimistic about the global economic outlook. According to Robeco’s global head of fundamental equity, corporate investment programs continue to expand, which typically supports broader economic activity. He also highlighted the importance of emerging markets in the global AI supply chain, a factor increasingly influencing equity valuations.

Attention now turns to key U.S. economic data due later this week, including retail sales, inflation, and delayed payrolls figures. White House economic adviser Kevin Hassett noted that U.S. job growth could moderate in coming months as immigration policies slow labor force expansion while AI adoption boosts productivity.

In currency markets, the U.S. dollar index hovered near a monthly low at 96.97 after its sharpest one-day drop in two weeks. The move followed reports that Chinese regulators advised financial institutions to limit U.S. Treasury holdings due to concentration risk. The dollar was flat against the offshore yuan at 6.9167.

U.S. Treasury yields edged slightly higher, with the 10-year yield at 4.196%. Fed funds futures continue to signal expectations that the Federal Reserve will hold interest rates steady until June.

Commodities were mixed, with WTI crude easing to $64.15 per barrel. Gold slipped 0.9% to $5,018.59 an ounce, silver fell sharply, and cryptocurrencies including Bitcoin and ether also traded lower, reflecting a modest pullback in risk appetite.

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