Hong Kong (AFP) – Japanese stocks surged to a record high Monday following Prime Minister Sanae Takaichi’s election win, while healthy gains across the rest of Asia and Europe tracked a rally on Wall Street. After last week’s broad-based volatility, investors appeared to be enjoying a return to calm, with the news out of Tokyo providing hope for political stability in the world’s number-four economy.
Takaichi’s resounding victory saw her ruling Liberal Democratic Party take around a two-thirds majority of the lower house, paving the way for increased fiscal stimulus and massive tax cuts. “We will prioritise the sustainability of fiscal policy. We will ensure necessary investments. Public and private sectors must invest. We will build a strong and resilient economy,” she said Sunday as the results rolled in.
Analyst Kyle Rodda of Capital.com said the ruling Liberal Democratic Party’s victory had handed Takaichi “the mandate she was looking for for her big-spending agenda.” Equities are “poised to benefit from higher fiscal spending but interest rates that remain accommodative and negative in real terms,” he said.
“A decisive victory is typically a near-term positive for markets because it reduces political uncertainty and can add a ‘certainty premium’ — investors can price policy direction with more confidence, rather than worrying about fragile coalitions and legislative gridlock,” said Charu Chanana at Saxo Markets. However, she noted that the medium-term was a little more nuanced.
“A landslide can embolden a bigger fiscal and security agenda — more spending ambitions, more active defence posture, and potentially more geopolitical friction. But the same landslide can also create room for pragmatism: with her position secured, Takaichi has less need to campaign from the edges and more incentive to protect approval by moderating the most market-sensitive policies.”
Financial markets may also be nervous about Japan’s public finances and its gargantuan debt pile if Takaichi decides to cut taxes and boost spending. But for now, investors are upbeat, pushing the benchmark Nikkei 225 index more than five percent higher at one point to break 57,000 points for the first time, before paring the gains to end 3.9 percent higher. The yen also advanced.
“From a market perspective, the outcome is strongly supportive for Japanese equities…as Ms. Takaichi now has broad flexibility to pursue her pro-growth economic agenda and advance structural reforms,” wrote David Chao at Invesco. “Overall, the combination of political stability, policy continuity, and reform optionality is likely to be viewed positively by markets, reinforcing the constructive outlook I continue to have for Japanese risk assets.”
Elsewhere, Hong Kong, Shanghai, Sydney, Singapore, Mumbai, Jakarta and Taipei all enjoyed strong buying. Seoul climbed more than four percent, helped by a six percent jump in market heavyweight Samsung after a report said it would start mass production of its next-generation HBM4 memory chips. Bangkok added more than three percent after a stunning election victory for caretaker premier Anutin Charnvirakul’s conservative Bhumjaithai Party that boosted hopes for political stability.
London, Paris and Frankfurt opened in positive territory. The gains came after all three indexes on Wall Street ended last week on a positive note, with the Dow topping 50,000 points for the first time as traders focused on the prospects for the US economy and possible interest rate cuts. However, there remains a lot of uncertainty over the tech sector, which has been hit by worries over the vast sums being invested in AI and when — and if — they will see returns.
Precious metals edged up as they also enjoyed a return to stability after last week’s ructions. Gold was sitting just above $5,000 and silver was at $82, having seen wild swings from record highs of $5,595 and $121 to lows of $4,402 and $64. Oil prices edged down one percent on easing geopolitical concerns after Iran and the United States held nuclear talks in Oman, with Tehran calling the meeting “a step forward.” Bitcoin fetched around $70,500, having bounced back from a plunge to just above $60,000 during last week’s ructions.
– Key figures at around 0815 GMT –
Tokyo – Nikkei 225: UP 3.9 percent at 56,363.94 (close)
Hong Kong – Hang Seng Index: UP 1.8 percent at 27,027.16 (close)
Shanghai – Composite: UP 1.4 percent at 4,123.09 (close)
London – FTSE 100: UP 0.5 percent at 10,418.74
Dollar/yen: DOWN at 156.62 yen from 157.09 yen on Friday
Euro/dollar: UP at $1.1848 from $1.1825
Pound/dollar: DOWN at $1.3595 from $1.3615
Euro/pound: UP at 87.18 pence from 86.82 pence
West Texas Intermediate: DOWN 1.3 percent at $62.71 per barrel
Brent North Sea Crude: DOWN 1.3 percent at $67.19 per barrel
New York – Dow: UP 2.5 percent at 50,115.67 (close)
© 2024 AFP
