AI Hype Propels Japan to Lead Stock Market Surge Across Asia as Central Banks Weigh Future Moves

In a remarkable start to the week, Asian stock markets, spearheaded by Japan, witnessed a significant upswing, largely driven by the burgeoning enthusiasm surrounding artificial intelligence (AI). The Nikkei index, in particular, soared to a new 34-year high, fueled by the tech sector’s vigorous performance, especially chip stocks like Taiwan Semiconductor Manufacturing (TSMC), Nvidia, and Advanced MicroDevices, which thrived on heightened demand for AI-related high-end chips.

This AI-induced optimism is set to intensify focus on forthcoming corporate earnings reports from tech and industrial giants such as Intel, IBM, Tesla, Netflix, and Lockheed Martin. S&P 500 futures saw a modest increase, building on the record close achieved on Friday, while Nasdaq futures marked a more notable gain.

However, the regional outlook is not without its challenges. MSCI’s broadest index of Asia-Pacific shares outside Japan modestly improved after facing pressures last week, largely due to China’s market struggles. Despite hitting five-year lows and speculation of state intervention to buoy stocks, Beijing has shown restraint in unleashing aggressive economic stimulus, with the central bank expected to forego a rate cut in its Monday operations.

Attention also turns to major central banks, with the Bank of Japan anticipated to maintain an ultra-easy monetary stance in its Tuesday meeting, buoyed by a slowdown in consumer inflation. Analysts are closely watching Japan’s wage trends to gauge potential shifts in monetary policy.

In Europe, the European Central Bank (ECB) is predicted to hold its ground in the upcoming Thursday meeting, despite pressures for rate adjustments. Futures markets are adjusting their expectations, contemplating the timing and magnitude of potential ECB rate cuts.

Central banks in Canada and Norway are also in the spotlight, with policy decisions expected later this week. The Federal Reserve is in a pre-meeting blackout period, with market predictions oscillating regarding potential rate cuts in March and subsequent easing in May.

This week’s financial narrative will be further shaped by key economic data releases, including U.S. GDP growth figures and core inflation rates, which could influence central bank policies and market dynamics. Meanwhile, the dollar has strengthened, treasury yields have surged, and the oil market remains cautiously balanced between global demand concerns and Middle East supply tensions.