Asian stock markets pushed higher for a second straight session on Tuesday, tracking Wall Street’s upbeat mood and reinforcing expectations of a classic year-end “Santa rally.” With global equities touching fresh record highs, investors across the region are leaning into risk as the year winds down.
Asia Follows Wall Street’s Lead
The MSCI Asia Pacific Index rose around 0.3% in early trade, extending gains after a strong US session. Japan’s Topix index climbed about 0.5%, reflecting renewed confidence in equities as global momentum builds.
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US index futures were marginally higher in Asian hours, signaling that optimism from Wall Street hasn’t faded yet. In the previous session, a broad gauge of global stocks closed at a record high, setting the tone for markets in Asia.
Tech Stocks Power the Rally
Overnight in the US, the S&P 500 erased its December losses and moved closer to an eighth consecutive monthly gain — a streak not seen since 2018. Big technology names once again did the heavy lifting, with Tesla and Nvidia leading the advance among megacaps.
Market participants say much of the current rally is being driven by technical factors, optimism around policy support, and simple momentum as investors chase year-end gains.
“Everything is lining up for a festive finish to the year,” said Mark Hackett of Nationwide, noting that sentiment itself is becoming a driver as investors expect markets to keep moving higher.
Bonds, Dollar and Commodities in Focus
The risk-on mood weighed on US government bonds, with Treasuries selling off across the curve. Both two-year and 10-year yields rose by around two basis points. Despite that, traders are positioning for a bond rally in the weeks ahead, with some betting that 10-year yields could slide back toward 4% — levels last seen in late November.
The dollar index edged lower again after a sharp drop in the previous session. Gold continued to shine, adding to gains after closing at an all-time high, while silver also hovered near record levels amid ongoing geopolitical tensions.
Oil prices cooled slightly, with US benchmark crude slipping after a strong rally a day earlier driven by supply concerns linked to US actions around Venezuela.
Asia-Specific Developments to Watch
In currency markets, the Japanese yen was slightly firmer against the dollar. The move came after Japan’s finance minister issued a strong warning against speculative currency moves, signaling readiness to act if exchange rates stray too far from economic fundamentals.
In China, property developer China Vanke received last-minute support from creditors to extend a bond grace period, easing immediate default fears. At the same time, Chinese equities remain under watch after strategists at Citigroup downgraded their outlook on the market.
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Santa Rally and the Road to 2026
With stocks already having a strong year, the big question now is whether this optimism carries into early 2026. Equity positioning is rising, fund managers are holding historically low cash levels, and expectations of further gains are outweighing concerns about stretched valuations.
Markets are also closely tracking the policy outlook from the Federal Reserve, with traders pricing in two interest rate cuts next year. Fed Governor Stephen Miran recently warned that failing to continue easing could risk tipping the economy into a recession.
Technology stocks, which have led markets higher for much of the year, may once again decide how December ends. As analysts note, if a Santa rally does arrive, it’s likely to be powered by strong tech sentiment.
