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A profound divergence is splitting global markets on Friday, as a powerful record-setting rally on Wall Street fails to inspire a cautious Asia.

Instead of following America’s lead, the region is charting its own turbulent course, with markets being whipsawed by a potent cocktail of local economic data, political scandals, and high-stakes diplomatic maneuvers.

Overnight, the S&P 500 in the United States climbed above the 6,500 level to hit a new all-time intraday high, a sign of robust confidence. But that optimism has failed to cross the Pacific, where a far more complex and nuanced story is unfolding.

A Tokyo tightrope: inflation cools but remains a threat
 

In Japan, the Nikkei 225 slid 0.41 percent as investors digested a crucial inflation report from the nation’s capital.

While core consumer prices in Tokyo eased to 2.5 percent in August, a figure that matched economists’ forecasts, it stubbornly remains above the Bank of Japan’s 2 percent target.

The data paints a picture of a central bank still walking a fine line, forced to contend with persistent price pressures even as the nation’s unemployment rate shows signs of improvement.

A political storm rattles Seoul
 

Meanwhile, a political storm is rattling South Korea, sending the Kospi index down 0.22 percent. The sell-off was triggered by reports that the country’s former first lady, Kim Keon Hee, has been indicted on corruption and bribery charges.

The scandal, which involves the wife of the recently ousted former president, has injected a fresh dose of political instability into the market, weighing heavily on investor sentiment and the South Korean won.

A diplomatic thaw, a tariff hangover
 

The focus then shifts to the world’s two most populous nations.

In China and Hong Kong, markets were mixed as investors looked ahead to a rare and highly anticipated meeting between Indian Prime Minister Narendra Modi and Chinese President Xi Jinping at a security summit this weekend.

The talks, which will mark Modi’s first visit to China in seven years, are a significant step in patching up a relationship that has been fraught with tension.

This diplomatic thaw comes as the Indian market braces for a dramatic rebound. After a brutal two-day selloff triggered by the implementation of crushing 50 percent US tariffs, the Sensex and Nifty are set for a strong start.

The Gift Nifty is signaling a potential jump of 0.7 percent, putting the indices on course to snap their losing streak.

The rebound comes despite a significant flight of foreign capital, with FIIs having net sold 3,857 crore rupees worth of equities on Thursday.

However, a powerful wave of domestic buying, with DIIs picking up shares worth 6,920 crore rupees, is providing a formidable line of defense, setting the stage for a volatile but potentially positive end to the week.

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