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This rally is not occurring in isolation. Across Asia, momentum is building. Indian equities surged the most in more than three months on the back of tax-cut pledges. The MSCI Asia Pacific index has recently gained 0.4%, adding to signs that investors in the region are prepared to take on more risk.

The synchronization is important: Asia is leaning into growth while European and US markets remain tentative as Trump makes a renewed try to end the Ukraine war.

The Shanghai milestone carries global importance because of who is driving it. Local retail investors are taking the lead. Flush with liquidity, they are providing the fuel for the rally at a moment when international institutional investors remain largely cautious.

This divergence matters. It shows that regional pools of capital are increasingly able to move markets on their own terms. The world can no longer assume that Wall Street sets the tone everywhere.

For investors outside China, two lessons stand out. First, capital is no longer tied to a single center of gravity. The US still exerts enormous influence, but regional markets are proving capable of writing their own narrative.

Second, politics has an immediate and powerful effect. Trump's tariff truce with Beijing is one of the clearest demonstrations this year that optimism returns almost instantly when barriers and uncertainty are lifted.

The ripple effects are already visible. Cyclical stocks across Asia are attracting stronger bids. Oil prices are steadying, with Brent crude trading near US$81 a barrel as supply disruption concerns ease. Gold rose 0.4% as Treasuries inched higher, but safe-haven flows look vulnerable if investors continue to rotate toward equities.

This is why Shanghai's rally should be seen as a leading indicator rather than a domestic quirk. Local investors are showing what happens when liquidity meets confidence: markets respond rapidly and decisively.

If sentiment in Europe and the US follows the same path, we could see a broad-based re-rating of global equities into the final quarter of the year.

Timing is critical. If Trump's mediated Ukraine war talks produce even a modest gesture toward progress, it would reinforce the optimism already visible in Asia. Combined with the pause in tariff escalation with China, that could provide precisely the environment in which sidelined global capital begins to move back into equities.

Later this week, the US Federal Reserve's Jackson Hole retreat will give investors another focus point. Jerome Powell is widely expected to set the stage for a September rate cut after recent softer data.