Japanese Shares Set New Record, Gold Nears $4,000: Markets Wrap

Japanese shares extended their rally after the election of a pro-stimulus lawmaker as the country’s next leader sent the yen sliding and drove up yields of long-tenure bonds. Gold set another record as political crises around the world lifted demand for the haven asset.

The Nikkei index gained 0.6% to a new intraday peak, following a 4.8% jump on Monday. Asian artificial intelligence and chip stocks advanced after Advanced Micro Devices Inc.’s blockbuster deal with OpenAI. The yen held its losses ahead of Tuesday’s government bond auction, the first since Sanae Takaichi’s near-certain ascent to become Japan’s next prime minister. Japanese 30-year bond yield rose to a fresh record of 3.315%.

US equity-index futures fell 0.2% as President Donald Trump said he would be willing to talk to Democrats about health care only after the government reopened.

While equities worldwide have surged to successive record highs, worries over the US government shutdown and a political crisis in France have driven investors toward alternative assets such as gold and Bitcoin, sending both to new peaks. At the same time, a flurry of AI-related deals among chipmakers has propelled shares higher and fueled concerns of a speculative bubble reminiscent of the late-1990s dot-com era.

“Semiconductors are ‘on fire,’” said Louis Navellier at Navellier & Associates. “The AI narrative continues to gain momentum.”

Technology stocks have been powering a global equity rally, with Monday’s AMD deal being the latest big-budget data center agreement this year. It follows last month’s announcement that Nvidia Corp. was planning to invest as much as $100 billion in OpenAI amid demand for tools like ChatGPT and the computing power needed to make them run.

Tech firms are spending hundreds of billions of dollars on advanced chips and data centers, and the final bill may run into the trillions. The financing is coming from venture capital, debt and, lately, some more unconventional arrangements that have raised eyebrows on Wall Street.

With China and Hong Kong markets closed, investor attention is firmly on Japan. Takaichi’s election shook up global markets with stocks surging on prospects for more spending, while currencies and bonds weakened.

Options traders are the least bullish on the yen in more than three years now that Takaichi appears in line to become the next prime minister.

Traders are also bracing for the auction of 30-year government bonds. Two disappointing bond sales last week revived worries about fiscal spending in major markets.

Japanese long-term yields are climbing on the Takaichi-impact, which makes today’s 30-year auction a high-stakes event for G-10 debt markets. US and European yield curves will face steepening pressure should the sale be seen as underwhelming by bond investors.— Mark Cranfield, Markets Live strategist. Click here for the full analysis.

Volatility in Japan’s longer-dated government bonds is on the rise following Takaichi’s win, and the moves may spill over to markets as far away as the US and UK, according to Goldman Sachs Group Inc.

“Concerns over fiscal deterioration and potential credit downgrades have pushed long-term yields higher,” making it more likely the auction will “produce a weak result,” said Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management Co.

Meanwhile, gold’s rally has lifted its gains this year to more than 50%, putting the metal on track for its strongest annual advance since 1979. 

This year, traders have been betting more on gold, silver and Bitcoin, in what’s been called the “debasement trade.” The sudden push to a fresh all-time high in Bitcoin over the weekend has options traders adding to bets that the largest cryptocurrency will rally to $140,000. 

Investors starting to view gold as a safer asset than the dollar is “really concerning,” said Citadel’s billionaire investor Ken Griffin.

• The sovereign wealth funds of Abu Dhabi, Norway and Singapore and global money managers including BlackRock Inc. and Fidelity International Ltd. participated in the anchor share sale of LG Electronics Inc.’s Indian unit.

• A devastating fire at a major supplier for Ford Motor Co. is set to disrupt business for months, the Wall Street Journal reported.

• Elliott Investment Management has approached several Japanese companies about buying their shares in Sumitomo Realty & Development Co., according to people familiar with the matter.

Key Events This WeekFor top events, click here.

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.2% as of 10:37 a.m. Tokyo time

• Japan’s Topix rose 0.4%

• Australia’s S&P/ASX 200 fell 0.3%

• Euro Stoxx 50 futures were little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.1703

• The Japanese yen was little changed at 150.41 per dollar

• The offshore yuan was little changed at 7.1421 per dollar

Cryptocurrencies

• Bitcoin fell 0.5% to $124,634.55

• Ether fell 0.3% to $4,674.44

Bonds

• The yield on 10-year Treasuries was little changed at 4.15%

• Japan’s 10-year yield advanced 1.5 basis points to 1.695%

• Australia’s 10-year yield advanced seven basis points to 4.40%

Commodities

• West Texas Intermediate crude rose 0.2% to $61.79 a barrel

• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.