Asian equity markets extended a broad advance on Tuesday, with Japan leading the pack after a decisive weekend electoral victory for Sanae Takaichi. Investors have rushed into what market participants term a "Takaichi trade," betting that political clarity and policy continuity will underpin corporate confidence and risk appetite. The Nikkei 225 surged past the 57,000 mark and notched a third consecutive record close, while the TOPIX also made fresh highs.
Regional sentiment was buoyed by a stabilizing rebound in US tech stocks overnight, which helped lift the S&P 500 and Nasdaq, though US futures showed signs of fatigue in the Asian session. MSCI's Asia-Pacific ex-Japan index ticked up, and other markets followed Japan's lead: South Korea's KOSPI climbed toward its record close and Australia's ASX 200 posted gains for a potential third straight day. Portfolio flows appear to be rotating toward markets perceived as politically and economically predictable.
The rally in equities contrasted with weakness in commodities and mixed moves in currency markets. The dollar index steadied near 96.97 after a sharp one-day fall, and precious metals retreated—spot gold and silver fell sharply from recent peaks as dollar stability removed some of the tailwind that had powered earlier records. WTI crude eased modestly on position adjustments, though geopolitical tensions between the US and Iran were flagged as a possible constraint on deeper declines.
Offshore Chinese renminbi (USD/CNH) strengthened past the 6.91 threshold to around 6.9094, a move that market strategists say could reflect Beijing's gradual push to elevate the currency's global role. Analysts at Alpine Macro highlighted that raising the yuan's international standing is back on policy agendas, and the currency's appreciation comes amid broader investor recalibration across Asian assets.
The immediate market outlook hinges on a busy US economic calendar later this week. Retail sales, inflation and employment data will be parsed for clues on the Federal Reserve's path and, in turn, the sustainability of the regional risk-on mood. For now, political clarity in Japan and a softer dollar have combined to lift equity markets, while commodity and FX markets remain sensitive to both macro data and geopolitical developments.