Morning Bid: Politics dominate markets, from Japan stocks to bitcoin

Japanese markets surged, with the Nikkei hitting a record high near 48,000, driven by stimulus bets following Sanae Takaichi's political win, which also led to a yen plunge against the euro and a jump in long-dated bond yields. Concurrently, gold and Bitcoin reached new record highs, attributed to the ongoing U.S. government shutdown and a broader 'debasement trade' reflecting declining faith in fiat currencies, a trend potentially exacerbated by Takaichi's rise and the White House's weaker dollar policy. European markets remained largely flat amidst thin trading in other Asian regions, with attention turning to upcoming central bank speeches from Lagarde, Bailey, and Schmid.

Analysis

Asia stocks: Nikkei soars to record high as Takaichi win fuels stimulus bets A look at the day ahead in European and global markets from Kevin Buckland Politics was firmly back in the driver’s seat of global markets on Monday, not least after a surprise weekend win for right-wing fiscal dove Sanae Takaichi that sets her up to be Japan’s first female prime minister. The Nikkei sliced through several big psychological levels in the first minutes of trading in setting a fresh all-time high not far from 48,000. Long-dated bond yields, meanwhile, jumped to be just shy of record peaks on worries about the country’s finances. Short-dated yields pulled back sharply and the yen plunged to an unprecedented low versus the euro on speculation Takaichi could pressure the Bank of Japan to delay further rate hikes. At the same time, gold extended its record rally to just $75 short of $4,000 per ounce, while bitcoin vaulted above $125,000 for the first time on Sunday. The ostensible driver is the U.S. government shutdown, which is shaping up to be a protracted affair, as another vote failed in the Senate on Friday and Republican President Donald Trump threatened more funding cuts to Democratic states and more firings of federal workers. The reasons for the record rallies in alternative assets might run deeper though, as faith in the value of fiat currencies - already battered by the White House’s open and active pursuit of a weaker dollar - takes another blow from Takaichi’s ascension. JPMorgan calls it the "debasement trade". What’s in store today for European stocks - already perched at record highs - is less clear, with futures currently more or less flat. While Japanese stocks are soaring, most other major Asian markets are closed today, or thinner than usual. Mainland China, Taiwan and South Korea are shut, while Hong Kong trading is sandwiched between the weekend and a holiday on Tuesday. Australian markets are open, but half of the country’s states and territories have holidays today, including the most populous, New South Wales. There’s little in the way of data on Europe’s docket, with regional construction PMIs providing the highlight. There are plenty of central bank speakers though, including ECB President Christine Lagarde and Bank of England boss Andrew Bailey taking the podium at separate venues. Kansas City Fed chief Jeffrey Schmid is also scheduled for speaking duty. Key developments that could influence markets on Monday: -European construction PMIs (Sep) -Euro-area retail sales (Aug) -ECB President Lagarde speaks in Strasbourg, ECB Vice-President de Guindos and Bank of Spain Governor Escriva speak in Madrid, ECB chief economist Lane speaks in Frankfurt -BoE Governor Bailey speaks in Edinburgh -Kansas City Fed President Schmid speaks in Kansas City -U.S. government shutdown Which stocks should you consider in your very next trade? The best opportunities often hide in plain sight—buried among thousands of stocks you'd never have time to research individually. That's why smart investors use our Stock Screener with 50+ predefined screens and 160+ customizable filters to surface hidden gems instantly. For example, the Piotroski's Picks method averages 23% annual returns by focusing on financial strength, and you can get it as a standalone screen. Momentum Masters catches stocks gaining serious traction, while Blue-Chip Bargains finds undervalued giants. With screens for dividends, growth, value, and more, you'll discover opportunities others miss. Our current favorite screen is Under $10/share, which is great for discovering stocks trading under $10 with recent price momentum showing some very impressive returns! Political developments are the primary market driver, highlighted by Sanae Takaichi's unexpected weekend win in Japan, positioning her as a potential prime minister. This event, interpreted as a precursor to significant fiscal stimulus, triggered a dramatic market reaction. The Nikkei surged to a new all-time high near 48,000, while the yen plummeted to an unprecedented low against the euro on speculation that Takaichi's administration could pressure the Bank of Japan to delay rate hikes. Concurrently, Japanese long-dated bond yields rose near record peaks due to concerns over the country's fiscal health. This regional political shift is amplifying a broader global theme, which JPMorgan terms the 'debasement trade.' Faith in fiat currencies, already weakened by the White House's pursuit of a weaker dollar and a protracted U.S. government shutdown, is further eroding, fueling record rallies in alternative assets. Gold is approaching $4,000 per ounce, and Bitcoin has surpassed the $125,000 mark. European markets, however, are showing a muted open amidst thin holiday trading in several major Asian markets, with investor focus now turning to upcoming speeches from ECB, BoE, and Fed officials for further directional cues.

Key Decisions for Investors

• Investors should consider the Japanese market dynamics, potentially going long the Nikkei to capture stimulus-driven equity upside while monitoring the yen for further weakness.
• The pronounced rally in gold and Bitcoin, framed as a 'debasement trade', suggests that allocations to these alternative assets could serve as effective hedges against ongoing fiat currency weakness and political uncertainty in the U.S. and Japan.
• Given that market moves are fueled by political speculation rather than fundamentals, it is crucial to monitor for potential reversals by closely tracking upcoming central bank speeches from the Fed, ECB, and BoE for any hawkish shifts in tone.