Asia wrap: AI rocket boosts Asia to record heights

Asia markets opened the day like an AI rocket ship, testing the outer layers of its own atmosphere. Technology was the booster fuel, and South Korea the launch pad. Samsung and SK Hynix ripped higher on the back of OpenAI’s Stargate supply pact, a deal that feels less like a headline and more like scaffolding for the trillion-dollar AI cathedral rising on the global skyline. The Kospi hit record altitude intraday, and the MSCI Asia Pacific index followed suit, brushing against fresh highs as if daring gravity to intervene.

The AI story has shifted from hype to hardware. It is no longer a collection of abstract dreams about productivity—it is cranes, concrete, and capital expenditures on a scale that recalls the railroad and steel booms of prior centuries. From Altman’s whirlwind tour across Seoul and Taipei to Nvidia’s omnipresent role as the spark plug, this is industrial revolution redux. The chips are the bricks, the data centers the temples, and the power draw the lifeblood. Trillions will be spent, and markets are pricing it as a secular force.

Against that surge of optimism, the political dysfunction in Washington looks like little more than stage fog. The U.S. government has closed its doors, again, but traders have already squared that circle. Shutdowns steal visibility, not growth—markets simply trade with one eye covered. What matters more is the Fed’s hand, and here the script is being rewritten almost daily. ADP’s jobs data, deeply flawed though it is, came in soft, giving markets the excuse to lean harder into rate-cut bets. That even noisy data can ignite a fire tells you all you need to know about positioning: traders want a dovish tape, and they are willing to chase it.

Treasuries held their gains, a steady bid under the curve that acts like scaffolding beneath the equity rally. The dollar drifted sideways, reluctant to pick a fight, while gold paused after a breathless sprint to successive records. At nearly $3,900, bullion is no longer the hedge of choice—it’s the theater itself, staging both fear and faith in one glittering stage prop.

But not all was smooth air. Japan’s bond market threw up turbulence as a 10-year auction fell flat. Demand was sluggish, the bid-to-cover ratio softened, and the auction tail widened—clear signs of investors holding their fire with a BOJ hike in sight and an LDP leadership election days away. Each weak auction is a tremor under the floorboards of carry trades, reminding the street that yield differentials are shifting in real time.

The speeches ahead—Deputy Governor Uchida tonight, Governor Ueda tomorrow—are now the market’s Rosetta Stone. OIS markets have already penciled in a coin-flip chance of an October hike, and the Tankan survey this week only stiffened the case. Investors are reluctant to commit capital into an auction when the central bank’s next move could redraw the entire rate map.

So, the backdrop is this: Asia is being carried by AI’s rocket fuel, Washington is mired in its familiar theatre of shadows, the Fed is boxed into cutting sooner rather than later, gold has become a monument to monetary doubt, and Japan’s bond market is the crack in the dam that everyone can now hear dripping. It is a market of shifting gravities—tech stocks floating in orbit, Treasuries serving as scaffolds, gold as ballast, and JGBs as the fault line.

The question isn’t whether gravity will reassert itself. It always does. The question is who will be left still climbing when the boosters cut out.