US stocks surge on US-China trade optimism. Nikkei 225 hits a new record high as Japan’s political uncertainty subsides. The gold and US dollar markets are mixed.
Global stock markets rally as US-China trade tensions ease, Japan’s Takaichi secures premiership
Key takeaways
- US-China thaw boosts risk appetite: Softer trade rhetoric and upcoming talks in Malaysia reignited bullish sentiment, driving major US stock indices higher, led by the Russell 2000 (+1.9%) and Nasdaq 100 (+1.3%).
- Japan political clarity fuels rally: Sanae Takaichi secured a coalition to become Japan’s first female prime minister, sparking a 3.5% surge in the Nikkei 225 to record highs.
- Currencies and gold mixed: USD strengthened modestly on JPY weakness, while Gold (XAU/USD) eased 0.4% but remains in a short-term uptrend.
A tone-down in US-China trade tensions has reinforced a risk-on feedback loop back into the US stock market, as the major US stock indices staged bullish breakouts from their respective minor range resistances from 14 October.
Treasury Secretary Bessent has said the US and China will hold talks later this week in Malaysia. That came after he met virtually with Vice Premier Lifeng on Friday, 17 October. Discussions that the Chinese state media described as a constructive exchange of views.
On Monday, 20 October, the small-caps Russell 2000 and tech-heavy Nasdaq 100 led with gains of 1.9% and 1.3% respectively, while the S&P 500 and Dow Jones Industrial Average each added 1.1%.
Political uncertainty has subsided in Japan, which triggered a magnificent intraday rally of 3.5% on the Nikkei 225 to hit a fresh record close at 49,185 on Monday, 21 October, as news broke out that the ruling LDP's new leader, Sanae Takaichi, had managed to strike a coalition deal with the Japan Innovation Party to secure enough parliamentary votes to emerge as Japan’s first female prime minister that favours an expansionary fiscal policy and low interest rates.
In today’s Asia session, Takaichi has gathered enough votes to be officially named the new prime minister of Japan. The Nikkei 225 pared back some of its intraday rally but managed to close with a positive gain of 0.3% with a new all-time closing high of 49,316.
Hong Kong’s Hang Seng Index soared for the second consecutive day with an intraday gain of 1.3% at the time of writing on the backdrop of easing US-China trade tensions.
The US dollar managed to trade higher today as the US Dollar Index increased modestly by 0.1% led by weakness in the Japanese yen, as the JPY dropped by 0.3% against the greenback due to fears that the new Japanese government, led by a dovish Prime Minister Takaichi that may hinder the Bank of Japan (BoJ)’s ongoing normalisation monetary policy of gradually increasing interest rates. Despite the rebound seen in the USD/JPY, the US dollar has not broken above the key intermediate resistance of 151.70 at the time of writing.
Gold (XAU/USD) is taking a breather as it shed 0.4% after it recovered from last Friday’s losses and rallied by 2.4% to print another record high of US$4,381 on Monday, 20 October. Overall, its short-term uptrend remains intact as it continues to trade above the US$4,203/4,180 key support zone.
Our YouTube video above contains the latest intraday technical analysis on the US Wall Street 30, US Nas 100, US SPX 500, Hong Kong 33, Japan 225, Germany 30, EUR/USD, GBP/USD, AUD/USD, USD/JPY, gold (XAU/USD), and West Texas Oil.
