Stocks finish lower, US yields rise as investors take breather to assess Fed moves

NEW YORK – Global shares fell and US Treasury yields rose on Monday as investors took a breather following five straight sessions of gains and ahead of key economic data that could support bets on Federal Reserve interest rate cuts.

Equities on Wall Street finished lower, with utilities, healthcare, and industrial stocks leading losses. Energy stocks were the top gainers as Brent crude prices settled up more than 1%.

The Dow Jones Industrial Average fell 0.90%, the S&P 500 slipped 0.53%, and the Nasdaq Composite dropped 0.38%. All three indexes had finished higher in the prior five trading days.

European stocks slipped, with a drop in defense stocks helping fuel weakness. The pan-European STOXX 600 index fell 0.20%.

The MSCI World Equity Index was down 0.40% on the day following five consecutive sessions of gains.

“The bull argument, both technically and fundamentally, is as strong as it has been in some time, while the bears are reliant on AI and valuation skepticism,” said Nationwide Chief Market Strategist Mark Hackett.

US Treasury yields rose across the board. The yield on benchmark US 10-year notes rose 7.3 basis points to 4.092%. The 2-year note yield, which typically moves in step with Fed rate expectations, rose 4.3 basis points to 3.535%.

“The modest pullback today would not be unexpected, but it’s more of a pressure release valve following the rally than a sign of stress,” Hackett added.

Data on Monday showed US manufacturing contracted for the ninth straight month in November as the drag from import tariffs persisted. Other economic data including the closely watched Personal Consumption Expenditures Price Index are due later this week. The Fed will hold its next policy meeting on December 9 and 10.

Bank of Japan Governor Kazuo Ueda said the central bank will consider the “pros and cons” of raising rates at its next policy meeting, causing traders to sharply increase their rate-hike bets.

The Japanese yen strengthened 0.47% against the greenback to 155.45 per dollar. The euro was up 0.13% at USD 1.161.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.04% to 99.40.

Bitcoin was down 5.49% at USD 86,172.03, extending losses and putting bitcoin-buying companies under pressure. Gold hit its highest level in six weeks, driven by expectations of US rate cuts, and was last at USD 4,239.69, up 0.22%.

“The rate cut expectations have jumped up significantly in the past couple of weeks, although much of it is priced for next week,” said Wasif Latif, chief investment officer at Samarya Partners. “Today’s drop could be a combination of a deleveraging from crypto and risk assets tied to the facts that the rate cuts are priced and people are taking some profits.”

(Reporting by Chibuike Oguh in New York; Editing by Jan Harvey and Matthew Lewis)

Asian stocks steady on Fed rate-cut optimism; yen firms

SINGAPORE – Asian stocks made a steady start on Monday to the final month of 2025 as US rate-cut optimism lifted risk sentiment ahead of economic data, while the yen firmed, with investors weighing the prospect of a near-term rate hike.

The spotlight in the currency market has been on the Japanese yen, which strengthened to 155.64 per US dollar as Bank of Japan Governor Kazuo Ueda took the stage in Nagoya, Japan, with investors parsing his comments for cues on the timing of the next hike.

Ueda said in a speech to business leaders that the central bank will consider the “pros and cons” of raising interest rates at its next policy meeting in December.

In stocks, MSCI’s broadest index of Asia-Pacific shares outside Japan was steady at 703.19, having gained 23.5% so far this year and on course for its best annual gain since 2017. Japan’s Nikkei fell 1.3% in early trading.

US stock futures, though, were lower in Asian hours, while Hong Kong’s Hang Seng rose over 1% pushing Asian stocks higher.

“The risk bulls roll into December feeling positive about directional bias,” said Chris Weston, head of research at Pepperstone.

“As the clouds of worry that cast an ominous shadow over markets through to mid-November gently dissipate, they give way to new emotions — notably the fear of not participating and the risk of underperforming benchmark targets.”

Investor focus this week will be on US economic releases that cover manufacturing and services activity as well as consumer sentiment.

“With the US data void finally being filled and a busy economic calendar ahead, December looks set to be a merry one for volatility hunters,” said Matt Simpson, senior market analyst at StoneX in Brisbane.

Simpson said if the incoming data signal a slowdown without tipping into recession, then sentiment will likely stay buoyant while the US dollar weakens as it typically does at this time of year.

The dollar index, which measures the US currency against six other rivals, was at 99.414, little changed on the day. The index has dropped 8% this year, with much of the losses coming in the first half of the year.

CONSUMER SPENDING IN FOCUS

Investors will watch out for comments from Federal Reserve Chair Jerome Powell later in the day as they look for clues on what the Fed will do later this month.

Dovish comments from policymakers have convinced investors that a rate cut is on the cards. Traders are pricing in an 87% chance of a cut later in the month.

Attention will also be on early indications about holiday consumer spending as data from Black Friday and Cyber Monday retail sales events trickle in.

US shoppers spent a record USD 11.8 billion online, up 9.1% from 2024 on Black Friday, according to Adobe Analytics, which tracks 1 trillion visits that shoppers make to online retail websites.

Market focus has been on the yen for the last few weeks as doubts over when the next interest rate hike will come, and worries over fiscal policies under Prime Minister Sanae Takaichi have left the currency in the intervention zone.

Japan’s finance minister said on Sunday that recent erratic swings in the foreign exchange market and rapid yen weakening are “clearly not driven by fundamentals”, in yet another verbal warning that so far has not helped slow the yen’s decline.

In commodities, oil prices rose after OPEC+ agreed to leave oil output levels unchanged for the first quarter of 2026 at its meeting as the group slows its push to regain market share amid fears of a looming supply glut.

Brent crude futures were 1% higher at USD 63.03 a barrel. US West Texas Intermediate crude was at USD 59.16 a barrel, up 0.99%.

(Reporting by Ankur Banerjee in Singapore; Editing by Muralikumar Anantharaman)

Yen rises on Ueda comments; dollar braces for crucial December

SINGAPORE – The yen rose on Monday, helped by comments from Bank of Japan Governor Kazuo Ueda, who left the door open to a near-term rate hike, while the dollar began the month on the back foot as investors ramped up bets of a US rate cut this month.

Ueda on Monday gave a more upbeat outlook of Japan’s economy and said the central bank will consider the “pros and cons” of raising interest rates at its next policy meeting in December, in what market participants considered a hawkish tone by the governor.

That helped the Japanese currency extend gains, climbing 0.4% to a session high of 155.49 per dollar.

“It seems to be game-prep ahead of a potential rate hike, making a hike at the December or January meeting highly plausible,” said OCBC currency strategist Christopher Wong.

“But the question is if this is one hike and another long wait. A yen recovery would likely need the BOJ to follow through with stronger guidance.”

Traders have been pricing in a greater chance of a BOJ rate hike this month, with the yen’s recent slide – it fell 1.4% in November – adding to the case for raising rates.

Finance Minister Satsuki Katayama said on Sunday that recent erratic swings in the foreign exchange market and rapid yen weakening are “clearly not driven by fundamentals”.

In the broader market, the dollar eased as investors braced for a pivotal month that could bring the Fed’s final rate cut of the year and the confirmation of a dovish successor to Chair Jerome Powell.

The euro was up 0.04% at USD 1.1605, while sterling last bought USD 1.3239, after having clocked its best week in over three months on Friday in a relief rally following British Finance Minister Rachel Reeves’ budget reveal.

Against a basket of currencies, the greenback was down 0.05% to 99.39, having lost 0.7% last week.

Traders are now pricing in an 87% chance the Fed will cut by 25 basis points when it meets next week, according to the CME FedWatch tool.

The sharp repricing of Fed easing expectations and a report that White House economic adviser Kevin Hassett has emerged as the frontrunner to be the next Fed chair have dragged on the dollar, which on Friday clocked its worst week in four months.

US Treasury Secretary Scott Bessent said there was a good chance President Donald Trump would announce his pick before Christmas.

“With December FOMC now closer to fully pricing a 25bp cut, we think the market will increasingly focus on the pricing of subsequent meetings,” economists at Goldman Sachs said in a note.

“Division on the committee is restraining more dovish pricing, but with a large amount of labor market data due before the January meeting we think too little is priced in Q1.”

November’s US employment report will be released on December 16, after the Fed’s policy meeting this month, and will include October nonfarm payrolls.

There will be no unemployment rate for October as the longest shutdown in history prevented the collection of the household survey data.

The foreign exchange market was back in full swing on Monday, having recovered from an hours-long outage at the world’s largest exchange operator CME Group last week which upended trading across stocks, bonds, commodities and currencies.

The Australian dollar rose 0.08% to USD 0.6553, while the New Zealand dollar was little changed at USD 0.5738.

Bitcoin slid 4% to USD 87,543.06, while ether fell 5.5% to USD 2,855.93.

(Reporting by Rae Wee; Editing by Muralikumar Anantharaman and Edwina Gibbs)

Gold edges lower from near three-week peak on profit-taking

Gold edged lower in early Asian trade on Monday from a near three-week peak, as investors booked profits amid increasing bets of a US interest rate cut later this month, while silver hit a record high.

FUNDAMENTALS

* Spot gold was down 0.2% at USD 4,221.68 per ounce, as of 0109 GMT, after hitting its highest level since November 13 on Friday. US gold futures for December delivery were up 0.2% at USD 4,261.60 per ounce.

* Silver climbed 2.2% to a fresh high of USD 57.59 per ounce.

* US rate futures are pricing in an 87% chance of a rate cut in December, according to the CME’s FedWatch tool.

* Recent dovish remarks from US Federal Reserve Governor Christopher Waller and New York Fed President John Williams, combined with softer economic data following the recent government shutdown, have strengthened expectations that the central bank will cut rates this month.

* Meanwhile, White House economic adviser Kevin Hassett, who has emerged as a frontrunner for the post of Fed Chair, said on Sunday that he would be happy to serve as the next chairman of the US central bank if chosen by President Donald Trump

* Like Trump, Hassett believes interest rates should be lower.

* Non-yielding gold tends to perform well in low-interest-rate environments.

* Investors are looking ahead to US manufacturing and private payroll data due later this week to gauge chances of a rate cut at the central bank’s December 10 meeting.

* The US dollar held near its lowest level since November 17, making greenback-priced gold less expensive for other currency holders.

* Elsewhere, platinum lost 0.2% to USD 1,669.15, while palladium gained 2.3% to USD 1,483.51.

DATA/EVENTS (GMT)
0030	Japan S&P Global Mfg PMI Final SA Nov
0145	China RatingDog Manufacturing PMI Final Nov
0850	France HCOB Manufacturing PMI Nov
0855	Germany HCOB Mfg PMI Nov
0900	EU HCOB Mfg Final PMI Nov
0930	UK S&P GLOBAL MANUFACTURING PMI Nov
1445	US S&P Global Mfg PMI Final, ISM Manufacturing PMI Nov

(Reporting by Ishaan Arora in Bengaluru; Editing by Subhranshu Sahu)

Gold steadies at near two-week high as investors weigh Fed rate-cut bets

Gold prices remained steady on Thursday after hitting a more than one-week high in the previous session, as market participants weighed the possibility of an interest rate cut in December amid conflicting signals from the US Federal Reserve.

FUNDAMENTALS

* Spot gold was steady at USD 4,162.98 per ounce, as of 0047 GMT. US gold futures for December delivery fell 0.1% to USD 4,158.60 per ounce.

* Conflicting signals on the timing and magnitude of interest rate cuts have accelerated hedging flows into swaptions and derivatives tied to overnight rates, with investors seeking protection against heightened policy uncertainty.

* Some Fed officials, led by New York Fed President John Williams and Governor Christopher Waller, have stated a December rate cut may be warranted due to labor market weakness putting downward pressure on Treasury yields and reinforcing dovish bets in futures markets.

* Benchmark 10-year Treasury yields held near one-month lows in the previous session.

* Their stance, however, contrasted with several regional Fed presidents advocating a pause in easing until inflation shows a more convincing move toward the 2% target.

* Meanwhile, Kevin Hassett, who has emerged as a frontrunner to replace Jerome Powell as Fed Chair, like US President Donald Trump, has said interest rates should be lower.

* US rate futures are pricing in an 85% chance of a rate cut in December, according to the CME’s FedWatch tool.

* Non-yielding gold tends to perform well in low-interest-rate environments.

* Data on Wednesday showed that the number of Americans filing new applications for unemployment benefits fell last week, though the labor market is struggling to generate enough jobs for those out of work.

* US consumer confidence also weakened in November as households grew more concerned about jobs and their financial outlook.

* Elsewhere, spot silver was flat at USD 53.34 per ounce, platinum fell 0.3% to USD 1,583.94, and palladium lost 0.4% to USD 1,417.56.

(Reporting by Ishaan Arora in Bengaluru; Editing by Rashmi Aich)

Stocks rise on US rate cut hopes, yen still in intervention zone

SINGAPORE – Asian stocks rose on Thursday, and the dollar was soft on growing expectations of an interest rate cut from the Federal Reserve next month, while the yen stayed in the spotlight, with traders weighing the prospect of a rate hike before the end of the year.

A holiday-curtailed week has led to limited moves across markets, with stocks keeping a largely upbeat tone and currencies much more sedate. The US markets are closed for the Thanksgiving holiday on Thursday and are due to trade for a short session on Friday.

MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.27% higher, tracking gains from Wall Street and on course to snap a three-week losing streak. Japan’s Nikkei and South Korea’s Kospi surged over 1%.

Investor focus will also be on the Chinese property sector as property developer China Vanke seeks bondholder approval to delay the repayment of a 2 billion yuan (USD 282.6 million) onshore bond.

A public bond extension would be the first for the state-backed property developer, a household name with many projects in China’s biggest cities and could trigger a new wave of anxiety in both financial and property markets.

SURGING RATE CUT WAGERS

While the US data flow has resumed since the record 43-day government shutdown ended mid-November, most of the economic reports issued so far have been significantly dated and have offered very little insight into the health of the economy.

That has turned investors’ attention squarely on comments from Fed officials to gauge the US monetary policy path, with comments this week from San Francisco Federal Reserve Bank President Mary Daly and Fed Governor Christopher Waller boosting expectations of a rate cut.

Traders are now pricing in an 85% chance of a rate cut next month compared with just 30% a week earlier, CME FedWatch showed.

George Boubouras, managing director of K2 Asset Management, said there is enough on the labour market weakness to offset the current inflation pulse, with a December rate cut on balance looking reasonable.

“While core inflation is above target, the US 10-year breakeven inflation rate around 2.25% suggests that markets are broadly comfortable that inflation expectations remain reasonable. In the short-term, USD weakness is expected to persist but to be reversed in the March quarter 2026.”

The euro rose to its highest in more than a week at 1.16045 in early trading. The dollar index, which measures the US currency against six rivals, was little changed at 99.523, after dropping 0.28% on the previous day.

Data on Wednesday showed the number of Americans filing new applications for unemployment benefits fell to a seven-month low last week, suggesting layoffs remained low.

Sterling rose to USD 1.3247, a one-month high, after UK finance minister Rachel Reeves’ budget helped alleviate some concern about Britain’s long-term finances.

YEN WATCH

The Japanese yen strengthened a bit to 156.16 per dollar as investors kept an eye on possible intervention from Tokyo after weeks of verbal jawboning from authorities to stem the currency’s relentless slide.

Prime Minister Sanae Takaichi ruled out on Wednesday the possibility that Japan could face a British-style “Truss moment”, or loss of market confidence stemming from her expansionary fiscal policy.

The Japanese currency has weakened by nearly 10 yen since the start of October as Takaichi took over the helm amid worries the administration’s spending plans will need heavy borrowing, and on doubts over the timing of the next rate hike from the Bank of Japan.

Sources told Reuters that the BOJ is preparing markets for a possible rate hike as soon as next month, as it may take a more consistent rate hike path to alter the trajectory of the currency.

Bitcoin was back above USD 90,000 on Thursday, on track to snap a four-week losing streak with a nearly 3% gain. Gold was flat at USD 4,164.81 per ounce, after rising 0.8% in the previous session.

(Reporting by Ankur Banerjee in Singapore; Editing by Shri Navaratnam)

Global stocks to edge higher in 2026 but lag this year’s strong run

BENGALURU – Most major global stock indexes should trade higher by the end of 2026 but will struggle to repeat this year’s surprisingly strong performance, according to a Reuters poll of equity strategists, with over half expecting a correction in the coming months.

In April when the White House suddenly imposed sweeping tariffs not seen since the 1930s, the move sent the benchmark US S&P 500 tumbling over 10%. Since then the index has recovered all of its losses and is up around 40% with tech and artificial intelligence stocks leading the charge.

But, as many of those trade restrictions remain in place, there are plenty of risks ahead for the global economy and, by extension, stock markets, particularly of a potential sell-off in AI shares that could spill into broader market sentiment.

A 56% majority of analysts, 49 of 87, in the November 13-25 poll said a correction in most of the 15 global stock indexes surveyed was likely or very likely, while 38 participants said it was unlikely, including six that viewed such an event as very unlikely.

Back at the start of the year, a slightly smaller majority of analysts had expected a correction to hit stock prices in three months.

“This year’s strong gains will be difficult to replicate … This suggests slower returns and potentially higher volatility in 2026,” said Angelo Kourkafas, senior global investment strategist at Edward Jones.

Twelve of 15 global stock indexes surveyed will post fewer gains in 2026 than they have so far this year, poll medians showed.

Although India’s BSE, NSE, and France’s CAC 40 were expected to notch slightly higher gains over the next 12 months, the projected outperformance was just a modest 1% or less.

Meanwhile, fueled by gains in technology stocks – and especially AI-related companies – the S&P 500, which is up 14% for this year, will rise 11.7% from its current levels to 7,490 by the end of 2026, the sample’s median estimate showed.

However, lofty technology valuations and an exuberance over the AI trade are pressuring stocks as market valuations approach their highest since the dot-com bubble 25 years ago, according to LSEG Datastream.

“Investors appear to have grown complacent – after all, things have gone well so far. But this is precisely where the danger lies for markets. Ignoring risks doesn’t make them disappear,” said Berndt Fernow, deputy director at LBBW.

“From an investor’s perspective, another source of concern is the unprecedented concentration of market capitalization in just a few AI-driven companies.”

An improving economic environment, combined with still low valuations relative to the US, is expected to help European shares repeat this year’s strong gains in 2026.

The pan-European STOXX 600 index is expected to rise to 623 points by the end of 2026, gaining around 11%. The index has rallied 10.9% this year.

“We currently see a more favorable situation in Europe than the US, primarily due to lower concentration risks. Unlike the US, where relatively few mega-cap stocks dominate the main indices, Europe currently offers a broader and more diversified set of investment opportunities,” said Michael Heldmann, chief investment officer, systematic equity at Allianz Global Investors.

In Asia, Japan’s Nikkei, which has had a stellar run with the index gaining nearly 22% in 2025, is expected to rise 13% in 2026 on strong corporate earnings and economic growth driven by Prime Minister Sanae Takaichi’s government stimulus.

India’s benchmark BSE Sensex is predicted to rise 9% from current levels to reach a record high of 92,400 by the end of 2026 on strong domestic investor demand.

Canada’s main stock index was forecast to gain about 5% to reach another all-time high next year, but that would be well short of this year’s near 24% rise.

(Reporting by Hari Kishan; additional reporting and polling by correspondents in Bengaluru, Buenos Aires, London, Mexico City, Milan, New York, San Francisco, Sao Paulo, Tokyo, and Toronto; editing by Mark Heinrich)

Yields drop as bond market anticipates dovish Fed tilt

NEW YORK – US Treasury yields fell on Tuesday for a fourth straight session as data reinforced expectations the Federal Reserve will cut interest rates next month, with the rally accelerating on a report that White House economic adviser Kevin Hassett has emerged as the leading contender to become the next Fed chair.

Some of the economic data releases, including retail sales and producer prices data for September, had been delayed by the 43-day government shutdown, leaving some investors skeptical about their reliability in providing a picture of US economic health. Others saw the figures as confirming a general trend of slowing economic momentum, with price pressures remaining sticky.

“There’s no real trade here, because this September data is not going to change the picture much here,” said Slawomir Soroczynski, head of fixed income at Crown Agents Investment Management.

US retail sales rose 0.2% in September, slowing from August’s unrevised 0.6% gain and coming in below economists’ expectations for a 0.4% increase, the Commerce Department said on Tuesday.

Separately, the Labor Department reported that the Producer Price Index for final demand increased 0.3% in September, in line with forecasts, following an unrevised 0.1% decline in August. On a year-on-year basis, the PPI rose 2.7%, matching August’s increase.

“It’s not just that (the data) is old, it really wasn’t much of a surprise to move the needle,” said Jack Ablin, chief investment strategist at Cresset. “In fact, in many respects, it confirmed what a lot of economists and investors suspect, and that is that spending is weakening, but prices are still pretty persistent,” he added.

DOVISH TILT, STEEPER CURVE

A Bloomberg news report that Hassett could replace Jerome Powell when his Fed chairmanship ends in May next year boosted expectations of a dovish Fed tilt, even if the White House said any discussion on the new chair remained speculative until a final decision.

The yield curve steepened on the news, said Tom di Galoma, managing director at Mischler Financial Group. “The market rallied, and the front end led … he (Hassett) has been saying over and over that rates are too high.”

US Treasury Secretary Scott Bessent said on Tuesday he was concluding a second round of interviews later in the day for a new Fed leader, and there was a good chance President Donald Trump would announce his pick before Christmas.

Rates future traders were assigning an 85% probability to an interest rate cut by the Fed next month, in line with Monday and up from 50% a week ago, CME Group data showed.

The rate cut expectations had gained consensus after comments from Fed officials in recent days favoring further easing by the central bank.

Benchmark 10-year yields were last at 4%, over three basis points lower than on Monday and at their lowest in almost one month. They went below 4% during the session for the first time since late October.

Two-year yields, which more closely reflect market expectations on changes in monetary policy, were last at 3.461%, over four basis points lower on the day and at their lowest since October 24.

The curve comparing two- and 10-year yields steepened to 54 basis points from 53 on Monday, due to two-year Treasuries rallying more than the 10-year securities.

FIVE-YEAR AUCTION TAILS

A USD 70 billion five-year notes auction on Tuesday was met with tepid demand, partly because it came after the rally extension triggered by the Hassett headline, said di Galoma at Mischler.

The notes were sold with a high yield of 3.562%, which BMO Capital Markets said was half a basis point above the market at the bidding deadline, indicating investors demanded a small premium to absorb the issuance.

(Reporting by Davide Barbuscia, Editing by Nick Zieminski)

US tech valuations stretched further as earnings contribute less

US tech companies’ share of S&P 500 earnings has been slipping even as their contribution to the index’s market value remains near multi-decade highs, raising concerns that their prices are further removed from underlying profit trends.

According to a Reuters analysis, tech companies accounted for 20.8% of the S&P 500’s total earnings in the third quarter, down from 22.8% three quarters earlier. At the same time, their share of the index’s market capitalization rose to 31.1% as of Friday, compared with about 30% at the start of the year.

Analysts warn that this disconnect, combined with the sector’s outsized weight in passive portfolios, could magnify any disappointment in earnings and trigger broader index-level declines.

“The wider gap between the tech sector’s percentage in the S&P 500 market cap is partly justified by genuine future earnings power and FCF (free cash flow) growth, but not entirely,” said Illia Kyslytskyi, head of research at Yaru Investments.

Tech stocks have driven the market to fresh record highs on expectations that AI will generate outsized profits, leaving valuations increasingly dependent on rapid earnings growth.

The tech-heavy Nasdaq Composite Index was trading at a forward P/E of 29.28 based on current-year earnings estimates, well above its 10-year average of 23.48 and higher than the S&P 500’s 24.35.

Although the tech sector delivered strong profits in the September quarter, led by AI names such as Nvidia, some analysts said the outlook for future earnings hinges on how effectively AI translates into revenue for clients, and how efficiently providers deploy their spending.

Alexander Lis, chief investment officer at Social Discover Ventures, said the so-called “Magnificent 7” tech stocks saw margins temporarily boosted by AI-related capex, with suppliers booking revenue upfront, suggesting profitability could normalise as spending slows.

The Nasdaq index is up 18.4% so far this year but has fallen over 3.5% this month.

Derek Izuel, portfolio manager at Shelton Capital Management, said tech stocks could see a mid-single-digit pullback if earnings fail to keep pace with valuations.

“A more severe pullback that results in the risk premium back to normal would be closer to a double-digit decline.”

(Reporting By Patturaja Murugaboopathy; with additional reporting by Gaurav Dogra in Bengaluru; Editing by Vidya Ranganathan)

Nikkei to rise about 7% by mid-2026 on corporate earnings, economic stimulus

TOKYO, Nov 26 (Reuters) – Japan’s Nikkei share average is seen rising about 7% by June next year, supported by strong corporate earnings and economic growth driven by Prime Minister Sanae Takaichi’s government stimulus.

The cabinet last week approved a 21.3 trillion yen (USD 136 billion) economic stimulus package, the largest since the COVID-19 pandemic, to help households cope with persistent inflation.

Since Takaichi took office last month, expectations for aggressive economic stimulus have driven sharp gains in Japanese equities. In October, the Nikkei crossed the 50,000 mark for the first time and climbed 16.64%, its biggest monthly gain in 35 years.

Super-long bond yields have recently hit record highs and the Japanese currency 10-month lows. The Nikkei hit an intraday record high of 52,636.87 on November 4, but has since eased back.

The index is forecast to trade at 52,000 at the end of June in 2026, according to the median estimate of 16 analysts polled November 13-25, from Tuesday’s close of 48,660.

It is forecast to exceed all-time highs marked this month by the end of next year, rising to 55,000, up about 13%.

“The rally in October was too fast, and there was a risk of retreat,” said Kazunori Tatebe, chief strategist at Daiwa Asset Management.

“But the fundamentals have not worsened, and the market will continue to see positive market-moving cues, such as inflation, governance reforms, and corporate share buybacks”.

The index retreated from its peak in recent sessions as US stocks lost ground on divided views on the Federal Reserve’s rate path and concerns over valuations of artificial intelligence-related technology shares.

The latest Nikkei rally was supported by a few beneficiaries of the AI sector, such as chip-related Advantest and Tokyo Electron, as well as technology investor SoftBank Group.

Some strategists said there was a chance of a correction of more than 10% in the Nikkei in the next three months.

“The US market could fall as it is in the transition from the liquidity-driven market to profit-driven,” said Hiroshi Namioka, chief strategist at T&D Asset Management. “That decline may affect the Japanese market.”

(USD 1 = 156.7100 yen)

(Reporting by Junko Fujita; Additional reporting by Rocky Swift; Polling by Aman Kumar Soni and Jaiganesh Mahesh; Editing by Ross Finley and Louise Heavens)

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