Markets Rally: Nikkei Hits Record High Amid AI Euphoria. What’s Happening Today?

The Surge of the Japanese Nikkei Index

The financial stage is dominated by the surge of the Japanese Nikkei today, as the index reached a historic high.
Investors eagerly anticipate Federal Reserve Chairman Jerome Powell’s Senate testimony.
Will the governor support interest rate cuts following indications of a slowdown in the US labor market?

Global Markets and Record Highs

While global markets await this answer, the Japanese Nikkei hit another intraday record on Tuesday, following the S&P 500 marking its 35th record high this year on Monday.
The Japanese index closed the session with a +1.92% increase, in a positive atmosphere in Asia, mainly supported by semiconductor and AI-related stocks.

On Wall Street, the S&P 500 reached 5,570 points before Powell’s testimony, as traders position themselves for the earnings of some of the largest US banks, which unofficially kick off the second-quarter earnings season on Friday.
Expectations for the season are on the rise.

Market Today: Nikkei’s Soaring

The Nikkei 225 Stock Average rose to a record high, extending its annual advance to over 23%.
Specifically, the Nikkei 225 index increased by 2.36% to 41,745.64, hitting a new peak, while the broader Topix index rose by 1.34%, reaching new highs at 2,906.

Information Technology stocks contributed significantly to the gains in the MSCI Asia Pacific index.
The sentiment on AI-exposed stocks is the highest since 2019, based on the market’s view on future growth and option prices, according to Citigroup.

In China, investors remain uncertain about the central bank’s new liquidity operations revealed on Monday, with policymakers tightening their grip on interest rates and exerting more control over short-term borrowing costs.

Investors interpreted the move as if the People’s Bank of China had just raised rates, triggering a bond market sell-off.

Awaiting the opening of European stock markets, futures indices in Europe are down, while those in the US are up.
However, caution is advised: Morgan Stanley’s Mike Wilson stated that traders should brace for a significant stock market pullback as uncertainty surrounds the US presidential campaign, corporate earnings, and Federal Reserve policy.

“I think the probability of a 10% correction is highly likely from here to the elections,” Wilson stated in an interview with Bloomberg Television on Monday.

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