On Monday, international markets experienced a mix of reactions as investors analyzed the aftermath of the Taiwanese election and assessed the situation in the Middle East. Notably, U.S. markets remained closed in observance of Martin Luther King Day.

Focus on Taiwanese Election Fallout

The focus in Asia centered on the consequences of the Taiwanese election, which saw the current vice president, Lai Ching-te, being elected as the president-elect. Lai is known to have pro-independence leanings, adding another layer of tension between the United States and China. However, President Joe Biden reiterated that the U.S. does not support Taiwan’s independence, despite Beijing’s rebuke of the State Department for congratulating Lai. Moving forward, Deutsche Bank analyst Jim Reid suggests that while immediate risks may have reduced, this underlying issue is likely to persist.

Market Responses

Taiwan’s TAIEX index closed with a 0.2% increase on Monday, indicating a positive response to the election outcomes. On the other hand, Hong Kong’s Hang Seng Index experienced a 0.2% decline.

China’s central bank made a surprising move by keeping its key policy rates unchanged on Monday. It injected 995 billion yuan ($138.93 billion) of liquidity into the banking system through its one-year medium-term lending facility at an interest rate of 2.5%. This decision deviated from market expectations of a rate cut during this operation.

Japan’s Nikkei 225 index witnessed a 0.9% climb, led by shipping companies that benefited from anticipated increases in freight rates due to disruptions caused by the ongoing Middle East conflict. Notably, the Nikkei 225 index is currently at its highest level since 1990, bringing hopes of a normalization in monetary policy.

Situation in Europe

In Europe, the London Stock Exchange opened as usual following news of arrests made in connection with an alleged plot to disrupt trading on Monday. Early trading witnessed a 0.1% rise in London’s FTSE 100.

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