Asia open: The Santa rally finds its rails again

After a week where the market’s gait faltered — the worst stumble since April — the sleigh bells are ringing once more. What began as a tech wobble has turned into a full-throttle rebound, powered by hopes that Washington’s impasse is ending and that the Treasury’s frozen cash pile will soon be unblocked. The same TGA balance that drained liquidity for months could now unleash it back into the market like a thawed river after a long winter — liquidity, that old intoxicant, returning to flow through the pipes.

The scent of Washington’s reopening has lifted Asia’s sails: Tokyo, Seoul, and Sydney are all green at the open. The S&P 500 and Nasdaq 100 galloped ahead Monday, 1.5% and 2.2% respectively, as if traders had suddenly remembered that gravity was optional when the Fed and Treasury row in the same direction. Even the MSCI ACWI clocked its best day since June, with commodities breaking higher and the dollar taking a rare backward step. Gold gleamed, Bitcoin pulsed, and the market — that mercurial creature — once again chose to see the glass half full of liquidity.

The plumbing isn’t subtle — this is fiscal hydraulics in full view. The shutdown sucked oxygen out of the system. At the same time, the Treasury General Account swelled from $300 billion to nearly $1 trillion, a stealth tightening that did more damage than Powell’s entire repertoire of hawkish sermons. Over $700 billion in liquidity was locked behind that fiscal dam, starving the pipes that feed risk.

Now the tide is turning. Once the government reopens, that dam bursts — the TGA starts bleeding cash back into the market, reserves rise, and the plumbing hums again. Call it stealth QE, a TGA unwind, or Bessentomics if you like — the label doesn’t matter. The mechanism is simple: when the Treasury twists the valve, liquidity gushes, and markets, ever the thirsty crowd, drink until they forget what drought felt like.

The script feels familiar. Back in 2021, this same play — a flood of Treasury cash — ignited a blow-off top in equities. This time, the cast is different, but the plot rhymes: the government reopens, liquidity pours out, risk re-prices higher, and traders start whispering about a year-end melt-up. The Santa rally isn’t just sentimental; it’s mechanical — a function of funding flows, seasonality, and the simple fact that buybacks, retail bids, and systematic flows are still dry powder waiting to ignite.

Reopening breathes life back into the tape — not just through sentiment, but through visibility. With the data spigots turning on again, traders can finally anchor to something more tangible than rumour and rhetoric. The return of jobs and inflation prints restores the market's rhythm — the pulse the Fed listens to before its next move — giving macro desks something real to trade instead of guessing in the dark.

Treasuries bent under the weight of returning optimism — yields nudging higher as risk came back on and desks braced for the week’s $125 billion supply run. It’s a small concession for equity bulls if the liquidity tide is about to roll their way again. With the bond market shuttered for Veterans Day, it’s merely an intermission — a calm between auctions, before the statisticians punch back in and the next wave of data and issuance hits the tape.

In commodities, the rally broadened. Aluminum and copper both pushed higher, with the former nearing three-year highs as China’s capacity curbs and Western restocking met in the middle. Even US-listed Chinese names joined the party — XPeng rocketed 15%, TSMC’s ADRs rose 3%, and the narrative shifted from contagion to catch-up.

And across the Pacific, Japan’s new Prime Minister Takaichi unveiled a fiscal push heavy on industrial investment — part stimulus, part signal: the global policy pendulum has swung decisively toward growth again.

Throw in Trump’s tariff “dividend” talk into the fiscal blender, whether it's political theatre or a proto-helicopter drop, and only that reinforces the notion. Liquidity, fiscal or otherwise, is once again the market’s lingua franca.

Still, the market’s foundation is not without cracks. Last week’s selloff wasn’t born of panic but of exhaustion — a recognition that even AI stocks need air. Earnings beats went unrewarded; valuations felt stretched; private credit shadows lengthened. The middle class fretted, confidence slipped, and political fatigue set in. Yet in markets, narratives rarely die — they mutate. The “hope trade” is back, and hope trades like beta.

The AI complex, meanwhile, has steadied. Nvidia’s world still orbits around silicon gravity wells, and the hyperscalers’ balance sheets remain the backstop, underwriting the AI capex boom the way the railroads once underwrote the steel age. If valuations are a bubble, it’s one still fed by earnings oxygen and corporate buybacks.

Indeed, Flows remain the compass. Corporations are in buyback mode (Goldman estimates over $6 billion worth of stock buyback VWAP demand for each November trading day); retail demand shows no signs of fatigue; systematic strategies are idling on the sidelines, waiting for volatility to dip a fraction lower before re-engaging. It’s a tinderbox of potential demand — a setup that makes even hardened traders smirk when they talk about “Santa rallies.”

So, forget last week’s wobble. The sleigh is back on its rails, and the path is freshly packed with liquidity. Washington’s political theatre may yet have one more act, but the market has already moved to the next scene — the one where risk reawakens and traders, ever cynical, still can’t resist one more ride before the year end curtain falls.