(Bloomberg) — The dollar rose and Treasury futures fell as traders considered the possibility of Donald Trump winning the U.S. presidential election following the assassination attempt.
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The dollar rose 0.2% against other currencies, Bloomberg’s currency strength index, the Mexican peso fell and bitcoin hit its highest in more than a week, reflecting hopes that Republican President Donald Trump will return to the White House and enact tax cuts and higher tariffs.
Futures suggest yields will rise when spot trading opens in Europe after trading was closed in Asia for a Japanese holiday. Stocks fell in Asia, with Chinese shares opening lower ahead of key data releases and a major domestic political event. S&P 500 futures suggest a higher opening in the U.S.
“The U.S. dollar is likely to get a boost as markets price in the possibility of Trump 2.0, but the Mexican peso and Chinese yuan could take a hit,” said Charu Chanana, market strategist at Saxo Capital Markets. “Trump-related trades could come back into focus.”
Trump’s support for fiscal easing and higher tariffs is generally seen as favorable for the dollar and weakening Treasuries. Yields rose sharply after Joe Biden’s poor performance in a debate last month, illustrating the sensitivity of Treasuries, especially longer-dated ones.
To be sure, with nearly four months left in the US election campaign, there is still plenty of room for surprises.
Shares in South Korean defense and nuclear companies also rose, reflecting the U.S. political situation reverberating around the world. Bitcoin hit $61,000 on Monday as President Donald Trump increasingly turns to the cryptocurrency industry to garner support from voters.
Monday’s move also follows what many saw as a turning point in the Federal Reserve’s approach to tackling inflation, with economic reports reinforcing views of two interest rate cuts in 2024.
“If Trump emerges as an even clearer winner, we should see another bear market surge like we saw after the debate,” said Michael Purves of Thorbakken Capital. “In terms of the stock market, some stocks will benefit from lower corporate taxes and less regulation, but I don’t see the trajectory changing at an aggregate level.”
China
The story continues
Traders will also be watching the start of closed-door meetings expected to set longer-term policy on a range of economic and political issues.
The People’s Bank of China left its one-year policy rate unchanged, as expected, and economic activity indicators including GDP, retail sales and industrial production are due to be released soon as President Xi Jinping convenes the first day of the third plenary session.
“Expectations are low that the meeting will produce any groundbreaking policy outcomes or significantly boost confidence in the Chinese economy,” wrote Commonwealth Bank of Australia strategists led by Joseph Capurso. “That said, markets will be watching closely as any signs the government will further tighten demand-side policies, such as stimulating consumer spending and infrastructure investment, could boost the Chinese yuan, Australian dollar and New Zealand dollar.”
Major events this week:
Eurozone industrial production on Monday
US Empire State Manufacturing, Monday
Goldman Sachs Earnings Monday
Jerome Powell was interviewed by David Rubinstein on Monday.
Federal Reserve Chair Mary Daly to speak Monday
German ZEW survey forecast, Tuesday
U.S. retail sales, business inventories Tuesday
Morgan Stanley, Bank of America earnings Tuesday
Federal Reserve President Adriana Kugler to speak Tuesday
Eurozone Consumer Price Index, Wednesday
US housing starts, industrial production Wednesday
Fed Beige Book, Wednesday
Fed President Thomas Barkin to speak Wednesday
ECB interest rate decision Thursday
US initial jobless claims, Philadelphia Fed manufacturing index, Conference Board LEI, Thursday
Federal Reserve Board members Mary Daly, Laurie Logan and Michelle Bowman to speak Thursday
Fed’s John Williams and Raphael Bostic to speak on Friday
Some of the key market developments:
stock
S&P 500 futures were up 0.2% as of 10:37 a.m. Tokyo time.
Nikkei 225 futures (OSE) rose 0.2%
Australia’s S&P/ASX 200 rose 0.8%
Hong Kong’s Hang Seng Index fell 0.5%
The Shanghai Composite Index fell 0.2%
Euro Stoxx 50 futures fell 0.5%
currency
The Bloomberg Dollar Spot Index rose 0.2%.
The euro fell 0.2% to $1.0888.
The Japanese yen weakened 0.1% to 158.04 yen to the dollar.
The offshore yuan weakened 0.1% to 7.2806 yuan per dollar.
Cryptocurrency
Bitcoin rose 2% to $61,291.13.
Ether rose 2.4% to $3,277.27.
Bonds
merchandise
West Texas Intermediate crude fell 0.5% to $81.83 a barrel.
Spot gold fell 0.2% to $2,406.32 an ounce.
This story was produced with assistance from Bloomberg Automation.
–With assistance from Ruth Carson, David Finnerty, and John Cheng.
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