Asian Stocks Mixed as Dollar Up on Trump-Win Bets: Markets Wrap

(Bloomberg) — Asian stocks were mixed as the US dollar rose after the attempted assassination of Donald Trump reinforced bets that his chances of winning the presidential election have increased.

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A Bloomberg gauge of the greenback’s strength against major peers climbed 0.2% in Asia while S&P 500 contracts were little changed. US Treasury futures fell, indicating yields will rise when cash trading begins in London. Cash trading of US bonds is closed in Asia due to a holiday in Japan.

Australian and South Korean shares rose while Hong Kong futures indicated an early loss when markets open. Australian bond yields edged lower. Bitcoin topped $60,000 in the wake of the attack.

“Not reacting may prove to be the smartest thing you can do,” said Oliver Pursche at Wealthspire Advisors. “Markets will find their equilibrium and get back to the things that matter from an investment perspective, which are economic growth, monetary and fiscal policy and corporate earnings.”

In the aftermath of Saturday’s attack, chances of him becoming president again increased, according to PredictIt data.

Trump’s support for looser fiscal policy and higher tariffs are generally viewed as likely to benefit the dollar and weaken Treasuries. Yields surged in the wake of Joe Biden’s poor debate performance last month, showing the sensitivity of Treasuries — particularly longer-dated securities.

To be sure, there’s still plenty of room for surprises with almost four months to go in the US election campaign.

Traders are also now grappling with how much of the impact has already been priced into markets as Trump’s election odds steadily rose. Monday’s action also follows what many considered a watershed week in the Federal Reserve’s fight against inflation, with economic reports bolstering bets on two rate cuts in 2024.

“It’s surprising that markets have not reacted more to increased uncertainty resulting from the Trump assassination attempt in the early hours of trading,” Lloyd Chan, a strategist at MUFG in Singapore. “It could be that the US dollar is still being weighed down by more dovish market expectations for Fed rate cuts following a string of cooler price pressures and weaker economic data from the US.”

Other assets positively linked to the so-called Trump trade include the shares of energy firms, private prisons, credit-card companies and health insurers. Renewable-energy stocks could suffer. Bitcoin may rise further, given both its appeal to investors seeking a hedge for political turmoil away from conventional financial assets, and Trump’s pro-crypto stance.

“From a markets perspective, I would suggest that if Trump emerges as an even more obvious winner, then we should see the bear-steepener we saw after the debate,” said Michael Purves at Tallbacken Capital. “In terms of equities, I don’t think this changes the trajectory at the overall level, though some stocks which will benefit from lower corporate taxes and lower regulation.”

China

As the Trump shooting fallout abates, traders will be focused on the People’s Bank of China’s key rate decision and the start of a closed-door conclave that’s expected to set long-term policy on a wide range of economic and political issues.

It’s expected the one-year medium term lending facility is kept unchanged at 2.5% as the central bank focuses on currency stability despite weak inflation, sluggish consumption and a housing rout, according to Bloomberg Intelligence.

Shortly following the decision, economic activity readings including GDP, retail sales and industrial output are also due as President Xi Jinping convenes the first day of the Third Plenum.

“Expectations are low for the meeting to lead to groundbreaking policy initiatives and materially lift in confidence about the Chinese economy,” Commonwealth Bank of Australia strategists led by Joseph Capurso wrote. “That said, markets will closely watch if the government signals more demand side policies, for example to stimulate consumer spending or infrastructure spending which may give a boost to Chinese yuan, Australian dollar and New Zealand dollar.”

Key events this week:

Eurozone industrial production, Monday
US Empire State Manufacturing, Monday
Goldman Sachs earnings, Monday
Jerome Powell is interviewed by David Rubinstein, Monday
Fed’s Mary Daly speaks, Monday
Germany ZEW survey expectations, Tuesday
US retail sales, business inventories, Tuesday
Morgan Stanley, Bank of America earnings, Tuesday
Fed’s Adriana Kugler speaks, Tuesday
Eurozone CPI, Wednesday
US housing starts, industrial production, Wednesday
Fed Beige Book, Wednesday
Fed’s Thomas Barkin speaks, Wednesday
ECB rate decision, Thursday
US initial jobless claims, Philadelphia Fed manufacturing, Conference Board LEI, Thursday
Fed’s Mary Daly, Lorie Logan and Michelle Bowman speak, Thursday
Fed’s John Williams, Raphael Bostic speak, Friday