Dow Jones & Nasdaq 100 Climb on Weaker Yen, Fed Hopes, and Election Buzz

Trump Optimism Lifts US Stock Futures Ahead of APEC Summit

US stock futures joined the broader Asian equity markets with solid gains amid further cooling in US—China trade tensions.

President Trump lifted sentiment, stating that he expects to reach a fair trade deal with President Xi at the APEC Summit later this month. Despite the recent escalation in tensions, Trump also said that China has been very respectful of the US, suggesting progress toward lower tariffs on Chinese shipments.

LDP Leader Takaichi Set to Become Japan’s Prime Minister, Fueling Yen Carry Trades

As US—China trade tensions eased, rising expectations of Japan’s Liberal Democratic Party leader Sanae Takaichi becoming prime minister boosted risk appetite. Takaichi’s pro-ultra-loose monetary policy stance could derail the Bank of Japan’s plans to raise interest rates. A weaker Japanese yen could fuel yen carry trades, potentially sending US stock futures to new highs.

Why US stock futures traders need to monitor USD/JPY trends:

A more dovish BoJ policy stance could widen the US—Japan interest rate differential, supporting US dollar strength. A wider rate differential, driven by easing expectations of BoJ rate hikes, may increase borrowing of the yen at lower rates to fund investments in US stock futures.

A parliamentary vote could confirm Takaichi as Japan’s first woman prime minister later today. Notably, the Nikkei Index soared 1.52%, briefly breaking the 50,000 barrier. USD/JPY rose 0.24% to 151.103 in morning trading.

US Stock Futures Climb as Markets Cement Fed Rate Cuts Bets

Easing US—China trade friction and bets on a Takaichi election win delivered a perfect storm for US stock futures.

The Dow Jones E-mini climbed 31 points in early trading on Tuesday, October 21. Meanwhile, the Nasdaq 100 E-mini advanced 50 points, and the S&P 500 E-mini gained 9 points.

Expectations of back-to-back Fed rate cuts in October and December have also bolstered demand for US stock futures, eyeing a three-day winning streak.

According to the CME FedWatch Tool, the chances of 25-basis point Fed rate cuts in October and December stand at 98.3% and 96.4%, respectively.

Japan Election, Earnings, and Capitol Hill in the Spotlight

Later on Tuesday, the election for Japan’s next prime minister will influence market sentiment. A Takaichi-led coalition government would likely weigh on the Japanese yen, driving US stock futures higher.

Across the Pacific, US corporate earnings will also require consideration. The Coca-Cola Company (KO), General Motors Company (GM), and Netflix (NFLX) are among the big names to release earnings results.

Meanwhile, traders should closely monitor Capitol Hill as the US Senate stalemate has extended to 20 days. A continued shutdown would further delay key US economic data reports, supporting a more dovish Fed rate path. If the Senate stalemate ends, the release of delayed data could also fuel risk sentiment.

Key Technical Levels for Dow Jones, Nasdaq 100, and S&P 500

Following the morning gains, US stock futures traded well above the 50-day and 200-day Exponential Moving Averages (EMAs), reaffirming bullish momentum.

However, the near-term trend will hinge on US—China trade news, the Japan election, and Senate votes on stopgap funding bills. Key levels traders should monitor include:

Dow Jones

• Resistance: 47,000, the October 3 record high of 47,323.
• Support: 46,500, 46,000, the 50-day EMA (45,972).

Nasdaq 100

• Resistance: October 9 record high of 25,394, 25,500.
• Support: 25,000, 24,500, the 50-day EMA (24,378).

S&P 500

• Resistance: October 9 record high of 6,812, 7,000.
• Support: 6,750, the 50-day EMA (6,607).

October Market Outlook: Japan, Earnings, and Capitol Hill in Focus

US stock futures have responded positively to US—China trade developments and updates from Tokyo. However, the Japan election, corporate earnings, and Fed rate cut bets would need to support sentiment to push markets to new highs.

Downside risks linger, with an escalation in US—China trade tensions likely to weigh on sentiment.

Follow our live coverage and consult the economic calendar for real-time market updates.