Asian stocks rallied on Monday as the Japanese yen weakened in response to political uncertainty following the ruling party’s loss of its parliamentary majority in recent elections.
In currency markets, the U.S. dollar surged to 153.76 yen, up from 152.24 yen, compared to the 140-yen levels seen last month. The euro dipped slightly, trading at $1.0796, down from $1.0803.
The depreciation of the yen has proven advantageous for major Japanese exporters, such as Toyota Motor Corp., whose shares increased by 3.7% in Tokyo. Nintendo Co. and Sony Corp. also saw gains, rising 2.6% and nearly 2.0%, respectively.
Despite losing some seats, Japan’s ruling Liberal Democratic Party (LDP) remains the dominant political force. However, a recent scandal involving unreported campaign funds resulted in several members failing to secure reelection during Sunday’s vote. According to Japanese media, the ruling coalition, including junior partner Komeito, won 215 seats, a significant drop from the 279-seat majority it previously held. Although a change in government is not anticipated, the LDP may seek an additional coalition partner.
Tokyo’s stock market responded positively, with analysts noting that the ruling party’s defeat had been largely anticipated and already priced into the market. The benchmark Nikkei 225 index jumped 1.6% during morning trading, reaching 38,527.52. Other regional indices also posted gains, with Australia’s S&P/ASX 200 rising nearly 0.1% to 8,217.80, South Korea’s Kospi up 0.6% to 2,598.73, Hong Kong’s Hang Seng adding 0.1% to 20,614.74, and the Shanghai Composite climbing 0.3% to 3,310.63.
Meanwhile, on Wall Street, U.S. stock indices ended the previous week with a mixed performance, marking the first losing week since early September. The S&P 500 remained largely unchanged after peaking at a 0.9% gain earlier in the day. The Dow Jones Industrial Average fell 0.6%, also recording its first weekly loss after six consecutive weeks of gains, while the Nasdaq composite rose 0.6%.
Investors are closely monitoring corporate earnings reports, which have generally been robust. Over a third of companies in the S&P 500 index have reported their quarterly results, with most exceeding analysts’ expectations. Additional earnings reports are anticipated in the coming weeks.
In the bond market, Treasury yields increased broadly, with the yield on the 10-year Treasury rising to 4.24% on Friday from 4.21% on Thursday. This upward trend in yields follows reports indicating that the U.S. economy remains stronger than anticipated. Upcoming updates on consumer confidence, job statistics, and inflation will further inform Wall Street’s outlook.
The Federal Reserve recently raised its benchmark interest rate to a two-decade high in an effort to curb inflation back to 2% while avoiding a recession. A key report on U.S. consumer spending, the PCE index, is expected later this week, with analysts projecting a slowdown in the inflation rate to 2%. Economists also anticipate another interest rate cut during the Fed’s November meeting.
In a separate development, Russia’s central bank raised its key interest rate by two percentage points to a record 21% in response to rising inflation fueled by military expenditures following its invasion of Ukraine.
In energy markets, benchmark U.S. crude prices fell by $3.19, settling at $68.59 a barrel, while Brent crude, the international benchmark, dropped $3.25 to $72.80 a barrel.
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