Japan Stocks Rise, Bond Auction Gets Firm Demand: Markets Wrap

(Bloomberg) — Japanese shares extended their rally after the election of a pro-stimulus lawmaker as the country’s next leader sent the yen sliding and drove up yields on long-tenor bonds. Gold set another record as political crises around the world lifted demand for the haven asset.

The Nikkei index gained 0.7% to a new intraday peak, following a 4.8% jump on Monday. Asian artificial intelligence and chip stocks advanced after Advanced Micro Devices Inc.’s blockbuster deal with OpenAI. US equity-index futures fell as President Donald Trump said he would be willing to talk to Democrats about health care only after the government reopened.

In Japan, a 30-year government bond auction drew a stronger demand ratio than its 12-month average. Bond futures pared their losses after the sale, the first since Sanae Takaichi’s near-certain ascent to become Japan’s next prime minister.

While equities worldwide have surged to successive record highs, worries over the US government shutdown and a political crisis in France have driven investors toward alternative assets such as gold and Bitcoin, sending both to new peaks. At the same time, a flurry of AI-related deals among chipmakers has propelled shares higher and fueled some concerns of a speculative bubble reminiscent of the late-1990s dot-com era.

“Semiconductors are ‘on fire,’” said Louis Navellier at Navellier & Associates. “The AI narrative continues to gain momentum.”

Technology stocks have been powering a global equity rally, with Monday’s AMD deal being the latest big-budget data center agreement this year.

It follows last month’s announcement that Nvidia Corp. was planning to invest as much as $100 billion in OpenAI amid demand for tools like ChatGPT and the computing power needed to make them run.

Tech firms are spending hundreds of billions of dollars on advanced chips and data centers, and the final bill may run into the trillions. The financing is coming from venture capital, debt and, lately, some more unconventional arrangements that have raised eyebrows on Wall Street.

Meantime, with China and Hong Kong markets closed, investor attention is firmly on Japan. Takaichi’s election shook up global markets Monday with stocks surging on prospects for more spending, while currencies and bonds weakened. The yen held its losses, hovering around the highly watched 150-a-dollar level.

“I think there’s definitely some more room to sell off, but at the same time I think this might be an overreaction,” said Tracy Chen, a portfolio manager at Brandywine Global, on Bloomberg TV.

Options traders are the least bullish on the yen in more than three years now that Takaichi appears in line to become the next prime minister.

Volatility in Japan’s longer-dated government bonds is on the rise following Takaichi’s win, and the moves may spill over to markets as far away as the US and UK, according to Goldman Sachs Group Inc.

Meanwhile, Goldman Sachs Group Inc. raised its gold forecast for December 2026 to $4,900 an ounce, up from $4,300, citing ETF inflows and central-bank buying. According to the latest data, the People’s Bank of China added to its gold holdings in September for an 11th consecutive month.

Such frenzied buying amid a broad decline in the dollar has lifted gold’s gains this year to more than 50%, putting the metal on track for its strongest annual advance since 1979. Investors starting to view gold as a safer asset than the dollar is “really concerning,” said Citadel’s billionaire investor Ken Griffin.

This year, traders have been betting more on gold, silver and Bitcoin, in what’s been called the “debasement trade.” The sudden push to a fresh all-time high in Bitcoin over the weekend has options traders adding to bets that the largest cryptocurrency will rally to $140,000.

Corporate News:

LG Electronics Inc.’s Indian unit is set to start taking orders for its $1.3 billion initial public offering, joining Tata Capital Ltd. to launch deals in what could be a record month for new listings in the country. A devastating fire at a major supplier for Ford Motor Co. is set to disrupt business for months, the Wall Street Journal reported. Elliott Investment Management has approached several Japanese companies about buying their shares in Sumitomo Realty & Development Co., according to people familiar with the matter. Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.1% as of 12:29 p.m. Tokyo time Japan’s Topix rose 0.3% Australia’s S&P/ASX 200 fell 0.3% Euro Stoxx 50 futures were unchanged Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1704 The Japanese yen was little changed at 150.39 per dollar The offshore yuan rose 0.1% to 7.1368 per dollar Cryptocurrencies

Bitcoin fell 0.8% to $124,226.31 Ether fell 0.1% to $4,685.45 Bonds

The yield on 10-year Treasuries was little changed at 4.16% Japan’s 10-year yield advanced one basis point to 1.690% Australia’s 10-year yield advanced seven basis points to 4.40% Commodities

West Texas Intermediate crude rose 0.3% to $61.90 a barrel Spot gold was little changed This story was produced with the assistance of Bloomberg Automation.

–With assistance from John Cheng and Joanne Wong.

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