Asian stock markets rose across the board; Japanese stocks hit new highs again under "high market trading," gold and silver declined, the US dollar stabilized, and the renminbi strengthened.

On Tuesday, February 10, Asian stock markets continued their strong momentum, with the Japanese market emerging as the leader. Over the past weekend, Japanese Prime Minister Sanae Takaichi won the election, and this political certainty has evidently boosted investor confidence, pushing Japan’s benchmark stock index sharply higher.

On Tuesday, the Nikkei 225 index broke through the 57,000-point mark, rising as much as 2.52% intraday, reaching a historical high for the third consecutive day. Market analysts noted that investors are actively engaging in the “Sanae Takaichi trade,” betting that her victory will lead to favorable policy continuity for the markets. Meanwhile, the MSCI Asia Pacific ex-Japan index climbed 0.4%, reflecting overall optimism across the region.

Overnight gains in the US stock market also provided support for Asia. Technology stocks rebounded after last week’s AI sell-off, with the S&P 500 and Nasdaq indices rising 0.5% and 0.9% respectively. However, US stock futures were slightly weak during Tuesday’s Asian session, with S&P 500 E-mini futures edging down 0.1%, showing signs of waning momentum after a short-term rebound.

Despite strong sentiment in stock markets, the commodities and currency markets paint a different picture. Following a sharp drop on Monday, the US dollar index stabilized, while gold and silver prices retreated significantly, and crude oil prices edged lower as positions were adjusted. Investors are now turning their attention to US retail sales, inflation, and employment data to be released later this week, to further assess the Federal Reserve’s policy path.

Nikkei 225 index’s gains expanded to 2%, setting another record high. The TOPIX index rose 1.08%, also breaking its record.South Korea’s KOSPI index climbed 1.21%, approaching its historical closing high; Australia’s S&P/ASX 200 rose 0.39%, marking a potential third consecutive day of gains.Offshore yuan broke through 6.91 against the US dollar, reaching 6.9094—the highest since May 2023, with a daily gain of 57 points.Spot gold fell 1% to $5,016.56 per ounce; silver plunged 2.5% to $81.31 per ounce.On the oil front, WTI crude futures dropped 0.1% to $64.15 per barrel.

“Sanae Takaichi trade” dominates Asian markets

Japan's robust market performance was the core theme of Tuesday’s Asian session. Sanae Takaichi’s overwhelming victory in the House of Representatives election eliminated political uncertainty and sparked heavy buying. The Nikkei 225 not only broke the 57,000-point threshold, the TOPIX also rose 1.08%, setting a new record as well.

This optimism has spread to other Asian markets. South Korea’s KOSPI rose 1.21%, nearing its record closing high, while Australia’s S&P/ASX 200 climbed 0.39%, poised for a third straight day of gains.

Kees Verbaas, Robeco’s Global Head of Core Equities, holds a positive outlook on the overall economic situation. He said, “Although we see some cracks, overall we’re pretty optimistic about the economic landscape.” He noted that investment plans by large companies are increasing rather than decreasing, which is usually favorable for economic activity, and emphasized “many AI supply chains are only possible with reliance on emerging markets.”

Dollar stabilizes, yuan strengthens

In the currency markets, the dollar index hovered around 96.97 on Tuesday, near the month's low. On Monday the dollar index saw its biggest single-day drop in two weeks, mainly due to a Bloomberg report.

In a research note, Alpine Macro analysts wrote: “Elevating the yuan’s global status is now on the policy agenda.”

In morning trading, offshore yuan broke the 6.91 mark against the US dollar for the first time since May 2023, now at 6.9094, up 57 points on the day.

Commodities decline: gold and silver down, oil edges lower

After two straight sessions of gains, precious metals pulled back on Tuesday.

Spot gold fell as much as 1% to $5,016.56 per ounce, and silver dropped 2.5% to $81.31 per ounce. Previously, boosted by a weaker dollar, gold set a record high of $5,594.82 on January 29. Losses have since narrowed.

On the oil front, WTI crude oil futures decreased 0.1% to $64.15 per barrel.

Analysts believe oil’s slide is mainly due to possible position adjustments, but ongoing tensions between the US and Iran may limit how far prices can fall. The US Department of Transportation has issued a maritime advisory, recommending US ships avoid Iranian waters, citing recent attempts by Iranian forces to force merchant ships into their waters.

Current market pricing suggests the Federal Reserve will hold rates steady until June. CME Group’s FedWatch tool shows market expectations for a 25-basis-point rate cut at the March 18 meeting are only 17.7%. White House economic adviser Kevin Hassett said Monday that due to Trump administration immigration policies slowing labor growth and new AI tools increasing productivity, US job growth may soften in the coming months. This statement adds more attention to the upcoming jobs data.

Tuesday’s Asian market was dominated by the “Sanae Takaichi trade,” with the Nikkei 225 surging more than 2% to a new record, lifting markets in Korea, Australia, and elsewhere. In contrast, commodities retreated, with gold down 1% and silver plunging 2.5%. The dollar index stabilized after a clear drop, and the yuan strengthened. Investors are closely watching upcoming US employment and inflation data to revise expectations for Fed rate cuts in June.

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