Investors shifted their focus away from the United States, with market volatility concentrated in Japan. Japanese stock indices surged to a record high, driven by news that Prime Minister Takaichi Sanae might call a snap election by the end of January, while government bonds and the yen came under pressure. On January 13, US stock index futures collectively declined, European stock indices opened mixed, and most Asian stock indices advanced. US Treasuries faced selling pressure, and the US dollar was largely flat. Gold and silver consolidated near recent highs, while base metals like copper, aluminum, and tin moved higher. Crude oil prices rose, and cryptocurrencies gained. Market attention turned to fundamental indicators such as upcoming US inflation data and corporate earnings reports. The risk-off sentiment triggered earlier by the news of a judicial investigation into Fed Chair Powell had significantly eased, with the mainstream market view characterizing it as short-term "political noise." Simultaneously, investors were awaiting a US Supreme Court ruling on the legality of former President Trump's tariff policies. Chris Larkin of E*Trade from Morgan Stanley commented:
"Having moved past last week's geopolitical surprise, the US market is set to focus on domestic political news. Barring any other surprises, the market will likely turn its attention to corporate earnings and inflation data."
Key market movements were as follows:
Dow Jones futures fell 0.08%, S&P 500 futures dipped 0.07%, and Nasdaq 100 futures declined 0.16%. Europe's Stoxx 50 index opened 0.1% higher, the UK's FTSE 100 fell 0.1%, France's CAC 40 dropped 0.2%, and Germany's DAX 30 gained 0.1%. Japan's Nikkei 225 index closed up 3.10% at 53,549.16, a record high; South Korea's KOSPI index closed up 1.47% at 4,692.63. The yield on the 10-year US Treasury note rose 1 basis point to 4.19%; the yield on the 10-year Japanese Government Bond jumped 6 basis points to 2.150%. The US Dollar Index was essentially flat; the USD/JPY pair rose 0.5% to 158.94. Spot gold fell 0.2% to $2,590.17 per ounce. Bitcoin rose 0.9% to $91,774.31; Ethereum gained 1.3% to $3,131.09.
US stock index futures were broadly lower as markets focused on the December CPI data due later in the day. As statistical distortions caused by the previous government shutdown fade, economists expect the core CPI's year-on-year growth rate to rebound to 2.7%. With housing inflation rebounding and potential cost pass-through from tariffs, the inflation rate remains stubbornly above the 2% target, pushing expectations for a January rate cut nearly to zero. Concurrently, according to Michael Casper and Wendy Song of Bloomberg Intelligence, US Q4 earnings season officially kicks off later this week and is expected to show solid performance.
The "Takaichi Trade" is making a comeback in Japanese financial markets. The Nikkei 225 surged over 3% on Tuesday, reaching a historic peak. Meanwhile, Japanese Government Bonds fell across the board, with the 10-year JGB yield climbing to its highest level since February 1999, and the 20-year yield hitting a record high. In the currency market, the yen weakened to 158.98 against the dollar, its lowest level since July 2024. On the news front, according to a CCTV report, Japanese Prime Minister Takaichi Sanae conveyed her intention to party officials to dissolve the House of Representatives on the 23rd and call a snap election. Analysis suggests that if Takaichi secures a stronger mandate in a snap election, it would further solidify her expansionary fiscal stance and preference for accommodative monetary policy. While this prospect buoyed stocks, it also fueled market concerns about Japan's debt sustainability, intensifying selling pressure on bonds and the yen. MLIV strategists noted:
Asian stocks extended their recent strong momentum, with additional support coming from investor concerns about tensions between Fed Chair Powell and the Justice Department. For investors seeking AI investment opportunities, Asian markets offer abundant choices, with companies in China, South Korea, and Japan at the forefront of development in this field.
Gold and silver consolidated at elevated levels. Overnight, prices for both metals surged to record highs, driven by a sharp spike in risk aversion following news of the judicial investigation into Fed Chair Powell. As market analysis increasingly leaned towards labeling the event as "political noise," some safe-haven buying subsided, leading to a period of consolidation. Regarding market structure, a notice from CME Group on January 12 stated that, following a normal review of market volatility and to ensure sufficient collateral coverage, the method for setting margins for gold, silver, platinum, and palladium contracts would change. Instead of a fixed amount, margins will now be calculated as a percentage of the contract's notional value. The new rates will take effect after the close on January 13. For traders, this shift means risk exposure will fluctuate directly with market movements. Periods of high prices or high volatility could trigger frequent margin calls. Capital requirements will no longer be stable, posing particular challenges for highly leveraged operators. In the short term, this could exacerbate liquidity tightness, forcing some traders to adjust positions or liquidate quickly, thereby amplifying volatility.
Aluminum prices approached their highest level since early 2022, while tin prices rose for a third consecutive session, bringing their year-to-date gain to nearly 20%. Base metals have had a strong start to 2026, extending the upward trend from the previous year. This rally is primarily driven by two fundamental expectations: on one hand, the market anticipates that the Fed's ongoing rate-cutting cycle will support global industrial demand, while current supply struggles to quickly match potential growth; on the other hand, the rapid development of artificial intelligence has significantly boosted structural demand expectations for key metals used in data centers, grid upgrades, and electronics—particularly copper—providing long-term support for metal prices.
Crude oil prices advanced, influenced by tensions surrounding Iran. Brent crude rose over 0.6% to $84.26 per barrel, reaching its highest level since November.
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