Extended American shutdown could cause aggressive gears from aggressive nourished, warns Cardillo

Global markets keep a close eye on Japan this week while the election of Sanae Takaichi, the first female prime minister of the country, reforms the sentiment of investors. The yen tumbled sharply against the dollar, while Japanese shares rose to new highlights on expectations of policy shifts under its leadership.

“Yes indeed,” said Peter Cardillo, Chief Market Economist at Spartan Capital Securities, in a conversation with ET Now. “It ensured that their currency took a pretty steep dive and again that is against the dollar and that ignited a very powerful rally on the Japanese stock market and it will probably continue for another day or two.”

Cardillo noted that investors are optimistic about potential monetary relaxation. “It seems that there is a good possibility that stimulates will be shortened and the possibility of a rate reduction is on the road and so the Japanese stock market applauded the election of the first female Prime Minister ever,” he added.

In the meantime, gold continues to attract global attention while pushing new record highs. Despite repeated calls that the yellow metal may have reached a peak, the prices have continued to climb, causing speculation about the possibility of $ 5,000 per ounce.

“It’s very real,” said Cardillo, referring to the Bullish Momentum. “In fact, my target in the short term is 4150 and so after that it can go for a while, but in the end we go in 5,000. All the ingredients for the gold market to keep rising are in place and it came for a long time.”

He pointed to buying and persistent market insurities in the central bank as important drivers. “From Fundamentals Perspective, central banks remain large buyers and this is an important point. But of course, with the stock markets that continue to reach new highlights, the gold market is a good place to bet your hedges,” Cardillo added. Regarding the American bond returns, Cardillo noted that markets have been braced to upcoming treasury auctions that could test the appetite of investors. “It rose for one or two days and the reason for that this week, in fact we have today the three-year auction and then followed by the 10-year-old and then, of course, the 30-year-old and the market positions itself for those bond auctions,” he explained. He warned that the question may not be strong in view of the continuous policy uncertainty. “I don’t see a very strong question and the reason why I say that is because again the possibilities of the Fed still stop before he becomes aggressive in terms of reducing interest rates, very real and that is due to the sticky high inflation we have,” he said.

Cardillo also marked that a potential closure of the US government could change the attitude of the FED. “Now you could claim that if it were to hang, let’s say, for two or three weeks, then there is a good possibility that the FED can become more aggressive and can actually be cut with 50 basis points, but that is still too viewed,” he concluded.

While worldwide investors weigh the leadership shift of Japan, Gold’s Rally and the American bond market signals, the broader image remains one of careful optimism mixed with persistent uncertainty.