Takaichi’s strong win boosts tech stocks

Last week’s hectic trading ended with a rebound in technology stocks and Bitcoin. Optimism spilled across most assets that are trading on sentiment these days, including gold and silver.

Nvidia, for example, jumped nearly 8% and pushed the Dow above the 50’000 mark for the first time in history — with no major news on the wire other than CEO Jensen Huang saying, “to the extent that people continue to pay for AI and AI companies are able to generate a profit from that, they’re going to keep on doubling, doubling, doubling.”

Fair enough. But what about capacity constraints? What about the speed of demand growth potentially lagging investments that could become obsolete faster than the depreciation rates used on Big Tech balance sheets? And what about circular deals? What happens if a key customer like OpenAI misses a payment?

The point is this: markets rebounded on Friday after a chaotic week, but the fundamental questions that keep investors up at night remain firmly in place. Last week, Amazon, Google, Meta and Microsoft announced plans to spend around $650–700 billion on AI-related investments in 2026, mostly in data centers, AI infrastructure, chips and computing capacity, as they race to dominate the AI era. That figure is far higher than earlier estimates and will flow straight into the pockets of enablers such as Nvidia, AMD, memory chipmakers and data center operators. Yet for the big spenders, a portion of this outlay seems to be a show-off — to signal dominance to others in the AI race rather than being fundamentally justified.

And big gains — like the ones we saw last Friday — can be just as unsettling as big losses. Both signal markets navigating agitated waters, where moves may not prove sustainable.

The good news is that Japanese Prime Minister Sanae Takaichi won — and won big — her bet in the weekend snap election. She pulled off a stunning victory, with her ruling Liberal Democratic Party (LDP) scoring a historic landslide and securing a two-thirds supermajority in the powerful lower house of parliament — even more if you include its coalition partner. That gives her party its most dominant position in decades and a strong mandate to push through an expansive fiscal agenda, particularly benefiting defense and technology. This likely helps explain why South Korea’s Kospi rebounded nearly 4% today. Still, the tech rebound could face speed bumps ahead.

Across Japanese markets, JGB yields jumped at the open, with the 10-year returning to the highest levels in a week on fiscal spending concerns. The Nikkei and Topix also jumped at the open, both hitting fresh record highs on growth and fiscal optimism, but the Nikkei later gave back most early gains — likely reflecting rising yield pressure and concerns that growth may come at a cost. The Topix, by contrast, is holding on to gains, up more than 2% at the time of writing.

The yen gapped lower at the open but quickly retraced losses, suggesting currency traders are leaning toward the idea that the Bank of Japan (BoJ) would not hesitate to act if inflation runs too hot under such an expansive fiscal plan. As a result, the yen’s rebound may look like a brief honeymoon — or a bout of day-dreaming — before the reality of fiscal spending sinks in for a country whose ambitions may be running ahead of its wallet.

Away from Japan, the dollar index kicks off the week under renewed selling pressure, partly due to gains in the yen, gold and silver. The  USDCHF continues to push lower after forming solid resistance earlier this month and remains one of the few assets left in the traditional safe-haven space.

Bitcoin is consolidating near the $70’000 mark this morning after successfully building support near $60’000 during last week’s slump. Still, it is hard to say whether the worst is behind us. The rebound since Friday has not even reached the minor 23.6% Fibonacci retracement of the October-to-last-week selloff, which sits near $77’000. For now, Bitcoin remains in a bearish consolidation phase.

With Big Tech earnings and spending announcements now behind us, the week ahead may see markets digest the news, reprice expectations and consolidate — barring surprise headlines from any direction. Coca-Cola, McDonalds and Cisco are among the big names that will go to the earnings confessional.

On the geopolitical front, US crude has returned to its 200-day moving average after weekend talks between the US and Iran were described as “very good” by the US President. Whether that is enough to justify easing tensions and keep oil in a bearish trend — below $64 per barrel, the 38.2% Fibonacci retracement of the summer 2025 slide — remains to be seen. Risks remain two-sided.

On the data front, the week’s agenda is packed with key US releases, including jobs data due Wednesday and inflation figures on Friday. Expectations point to continued softening in labour markets alongside easing inflation — the ideal combination for Federal Reserve (Fed) doves.

In the absence of major data elsewhere, the US dollar is likely to remain in the driver’s seat for FX markets. Major currencies start the week higher, with the EUR/USD and cable both gaining, though support from European Central Bank (ECB) and Bank of England (BoE) policy outlooks remains uncertain. In the UK in particular, expectations that the BoE is close to a rate cut should cap upside.

The AUD/USD is back above the 70-cent level and could extend toward 0.72 on divergence between Reserve Bank of Australia (RBA) and Fed outlooks — a move that would officially mark the end of the 2021–2025 downtrend. The AUD/JPY — one of the market’s favourite carry trades — hit a fresh record high this morning. Despite rising JGB yields and hawkish BoJ bets, rate differentials remain attractive for a further extension of the bullish trend.

The key risk is a direct FX intervention from Japanese authorities, who remain deeply concerned about the yen’s rapid depreciation and its impact on household purchasing power.