Takaichi Trade Fuels Nikkei As It Rockets Past 59,000, Dow Futures Sink Ahead Of Wholesale Inflation Number

Japan's Nikkei 225 surged to a historic milestone of 59,000 on Thursday, and it was above the 58,800 mark on Friday, propelled by aggressive sentiment following Prime Minister Sanae Takaichi‘s election, even as U.S. futures signaled a sharp retreat for Wall Street ahead of critical inflation data.

Record Highs In Tokyo

The Nikkei 225 hit an all-time high of 59,000 during a third straight session of record-breaking gains on Thursday.

This rally is being driven by the “Takaichi trade”, as investors bet that Prime Minister's growth-oriented policies—viewed as an extension of Abenomics—will lift stocks while pressuring the yen through "looser monetary policy and increased fiscal spending."

Sentiment was further bolstered by the government tapping Ayano Sato and Toichiro Asada for the central bank board, reported CNBC. Both are viewed as dovish, aligning perfectly with Takaichi's approach.

Wall Street Braces For Impact

The jubilation in Tokyo stands in stark contrast to the growing anxiety in New York. U.S. futures fell sharply Friday morning, with Dow Jones futures sinking 231 points, or 0.47%, as investors turned cautious ahead of wholesale inflation, scheduled for release before market hours.

The Russell 2000 followed suit, dropping 0.70%, suggesting a broad-based retreat from risk.

Market participants are closely watching for the Producer Price Index (PPI) release, fearing a “hot” print could force the Federal Reserve to maintain higher interest rates for longer. This technical divergence sees Japan benefiting from a weakening currency while the U.S. faces a potential valuation squeeze.

The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, closed lower on Thursday. The SPY was down 0.56% at $689.30, while the QQQ declined 1.21% to $609.24.

Mixed Results Across Asia

The broader Asian landscape showed significant fragmentation. While the Hang Seng Index managed a 0.63% gain, India's Nifty 50 tumbled 170 points or -0.67%, and Malaysia's index shed 1.26%.

Despite the Nikkei’s record run, the Bank of Korea provided a sobering note by raising its key interest rate by a quarter-percentage point in a bid to contain inflation and prevent capital outflows.

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