Political turmoil in Japan and France continued to rattle global markets for a second straight day on Tuesday. Currency and bond markets faced pressure, while global stocks struggled to find direction — even after a massive AI chip-supply deal between AMD and OpenAI lifted tech sentiment.
In Europe, stock futures signaled a muted open. EUROSTOXX 50 futures traded flat, and FTSE futures slipped 0.08%.
Japan: Yen Weakens as Takaichi Win Sparks Policy Shift
The weekend election of Sanae Takaichi, known for her support of aggressive fiscal and monetary policies, pushed the Nikkei index to new record highs early in the session. Her expected appointment as Japan’s next prime minister boosted expectations for higher spending and continued loose monetary policy.
The yen remained weak, trading beyond 150 per dollar, hitting a two-month low. Japanese government bonds also fell, driving yields higher. However, a 30-year JGB auction worth ¥536.8 billion ($3.57 billion) went smoothly, easing investor concerns over long-term debt demand.
“The yen is likely to stay under pressure,” said Tareck Horchani of Maybank Securities. “Takaichi’s win strengthens expectations for more fiscal stimulus and delays any chance of a near-term BOJ rate hike.”
Japan’s Finance Minister Katsunobu Kato added that authorities would stay alert to volatility in the currency market.
France: Political Unrest Deepens Market Fears
In France, the surprise resignation of Prime Minister Sébastien Lecornu added to political instability. The move sent French bonds lower and pressured the euro, which eased 0.14% to $1.1696.
Analysts say President Emmanuel Macron may try to form a new cabinet, but pressure is mounting for new legislative elections. “Macron faces a tough path forward,” said Thierry Wizman of Macquarie Group.
U.S. Shutdown and AMD–OpenAI Deal Shape Global Mood
Adding to global unease, the prolonged U.S. government shutdown further clouded investor sentiment, offsetting optimism from the AMD–OpenAI partnership.
The deal will see AMD supply AI chips to OpenAI in a multi-year agreement that could bring the company tens of billions in annual revenue, while giving OpenAI the option to buy up to 10% of AMD.
Despite the AI excitement, Nasdaq futures slipped 0.02%, and S&P 500 futures fell 0.05%, retreating slightly from record highs. Markets in Hong Kong and China were closed for holidays, while the MSCI Asia-Pacific Index outside Japan rose 0.38%.
Dollar Strengthens; Gold and Bitcoin Near Records
In currency markets, the U.S. dollar gained strength as the yen and euro weakened. Sterling slipped 0.11% to $1.3470, and the Australian dollar fell 0.09% to $0.6612.
“The strong dollar during a U.S. shutdown surprises many investors,” said Vishnu Varathan of Mizuho Bank. “History shows that any USD weakness during shutdowns tends to reverse quickly.”
Oil prices steadied, with Brent crude up 0.15% to $65.57 a barrel and U.S. crude at $61.78. Meanwhile, gold reached a record high of $3,977.19 per ounce, and Bitcoin hovered near its own all-time peak as investors turned to alternative assets for safety.
