AI Surge Lifts Asian Stocks to Record Highs Amid Fed Uncertainty
Overview
Asian markets, led by Japan's Nikkei hitting a record, climbed on Tuesday fueled by AI optimism. Gold prices surged past $4,600 amid investor unease over Federal Reserve independence following a Justice Department probe. Oil prices also rose on supply fears linked to unrest in Iran and U.S. trade warnings.
Asian Markets Soar on AI Enthusiasm
Asian equities surged on Tuesday, propelled by a wave of artificial intelligence optimism. Japan's Nikkei index, returning from holiday, leaped 3.4% to an all-time high, buoyed by a weaker yen and speculation of fiscal stimulus measures. South Korea and Taiwan also touched record peaks, while Chinese blue chips scaled a four-year summit.
MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.8% to a fresh record, reflecting broad regional strength. Analysts at Citi noted expectations for global equities to continue climbing in 2026, targeting a 10% upside for the MSCI AC World index by year-end. They cautioned that high valuations leave little room for error if companies miss earnings forecasts, but a 'soft landing' macroeconomic environment and AI-driven tailwinds should support profits.
Fed Uncertainty Lifts Gold, Weakens Dollar
Investor apprehension over the U.S. Justice Department's criminal investigation into Federal Reserve Chair Jerome Powell cast a shadow, raising concerns about the central bank's future independence. This unease pressured the dollar index, which held steady around 98.883 after an overnight decline. Analysts worry the Fed might be compelled to lower interest rates excessively, potentially triggering significant inflation.
Precious metals found favor amid the uncertainty. Gold prices broke above $4,600 an ounce for the first time before settling around $4,582. Christopher Louney, a gold strategist at RBC Capital Markets, described gold as a 'catch-all' and 'default hedge' against fear and uncertainty due to its safe-haven status. He anticipates gold prices could climb as high as $5,200 by year-end.
Oil Prices Climb Amid Iran Tensions
Crude oil prices reached seven-week highs as geopolitical tensions escalated. Unrest in Iran fanned fears for global supplies, exacerbated by U.S. President Donald Trump's warning of a 25% tariff on trade for any country doing business with Iran. Brent crude added 0.5% to $64.19 a barrel, and U.S. crude rose 0.5% to $59.81 per barrel.
US Banks Brace for Earnings and Rate Cap Scrutiny
In Europe, EUROSTOXX 50 futures edged up 0.2%, while DAX futures gained 0.1% and FTSE futures remained flat. U.S. futures showed a slight decline ahead of key December consumer price data. Major U.S. banks, including JPMorgan Chase, Bank of New York Mellon, Citigroup, and Bank of America, are set to report earnings this week. Management teams are expected to face intense questioning regarding President Trump's proposal to cap credit card interest rates at 10% from January 20, a move banks argue could restrict access to credit for millions.
