(Bloomberg) — The dollar slipped and Asian stocks fell after Joe Biden ended his reelection campaign and endorsed Vice President Kamala Harris. China’s central bank cut a key short-term interest rate.
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A Bloomberg gauge of the US currency’s strength shed 0.1% Monday after the US president bowed to pressure from the Democrats, with the yen and the Swiss franc edging up. The Mexican peso also climbed. US stock futures gained while 10-year Treasury yields slid in Asia.
Stocks dropped from Japan to South Korea and Australia. Futures for Hong Kong equities pointed to a steady open. The People’s Bank of China slashed the borrowing cost for a popular money market loan for the first time in almost a year, stepping up support for growth while shifting toward a new policy benchmark.
Investors have mulled for weeks a greater prospect that Donald Trump will win the November election following Biden’s weak debate performance, only for bets on a Trump win to accelerate last week following an assassination attempt on the Republican candidate a week ago. The question for investors is whether to stick with such trades now that Biden has dropped his bid for reelection.
“Facing bombshell surprises for the second week in a row, the Asian market will be under intense scrutiny,” said Hebe Chen, an analyst at IG Markets. “The accelerated wave of risk aversion could hit Asian stocks harder than the previous week as investors digest the unfamiliar political context. The forex market will also feel the heightened pressure.”
In commodities, oil and gold rose in early trading Monday.
The S&P 500 dropped 0.7% on Friday to cap its worst week since April. Tech shares fell ahead of earnings reports this week, while CrowdStrike Holdings Inc., the firm behind a massive IT failure that grounded flights and disrupted corporations around the world, slumped as much as 15% before paring losses.
Tesla Inc. and Alphabet Inc. will be the first of the “Magnificent Seven” to report earnings on Tuesday. Analysts will likely press Elon Musk’s electric-vehicle giant on the progress of its plans for robotaxis. And investors will delve into the details of Google’s parent revenue boost from artificial intelligence.
Instead, President Xi Jinping at the weekend unveiled sweeping plans to bolster the finances of China’s indebted local governments as the ruling Communist Party announced its long-term blueprint for the world’s second-largest economy. Those are centered around shifting more revenue from the central to local coffers, such as by allowing regional governments to receive a larger share of consumption tax.
“Like most documents of this kind, it did not say how Chinese leaders intended to reach those goals, many of which would require policies that are contradictory in nature,” said Bob Savage, head of markets strategy and insights at BNY Mellon. “The contradiction of China growth vs. stability are hanging over APAC markets and flows, still leaving Chinese yuan and commodities a key focus.”
Investors will watch whether China’s one- and five-year loan prime rates will also move lower later Monday after the PBOC’s decision to reduce the money market rate.
Elsewhere this week, traders will be focused on economic activity data in Europe, US second quarter growth and a slew of corporate earnings. The Bank of Canada will give a rate decision while the Federal Reserve’s preferred measure of inflation is also due.
Key events this week:
China loan prime rates, Monday
Hong Kong CPI, Monday
Taiwan jobless rate, export orders, Monday
Mexico retail sales, Monday
Israeli Prime Minister Benjamin Netanyahu embarks on visit to Washington, Monday
EU foreign ministers meet in Brussels, Monday
Singapore CPI, Tuesday
Taiwan industrial production, Tuesday
India’s budget for fiscal year through March 2025, Tuesday
Turkey rate decision, Tuesday
Eurozone consumer confidence, Tuesday
Alphabet, Tesla, LVMH earnings, Tuesday
Malaysia CPI, Wednesday
South Africa CPI, Wednesday
Eurozone HCOB PMI, Wednesday
UK S&P Global PMI, Wednesday
Canada rate decision, Wednesday
IBM, Deutsche Bank earnings, Wednesday
ECB Vice President Luis de Guindos speaks, Wednesday
Hong Kong trade, Thursday
South Korea GDP, Thursday
US GDP, initial jobless claims, durable goods, merchandise trade, Thursday
G-20 finance ministers and central bankers meet in Rio de Janeiro, Thursday through Friday
Bitcoin 2024 conference in Nashville, Thursday through July 27
Japan Tokyo CPI, Friday
US personal income, PCE price index, University of Michigan consumer sentiment, Friday
Mexico trade, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.3% as of 9:30 a.m. Tokyo time
Hang Seng futures were little changed
Japan’s Topix fell 0.8%
Australia’s S&P/ASX 200 fell 0.7%
Euro Stoxx 50 futures fell 1.1%
Currencies
The Bloomberg Dollar Spot Index fell 0.2%
The euro rose 0.1% to $1.0894
The Japanese yen was little changed at 157.42 per dollar
The offshore yuan was little changed at 7.2889 per dollar
Cryptocurrencies
Bitcoin rose 0.7% to $68,229.85
Ether rose 1.1% to $3,537.95
Bonds
Commodities
West Texas Intermediate crude rose 0.5% to $80.55 a barrel
Spot gold rose 0.3% to $2,409.20 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Joanna Ossinger, Richard Henderson, Matthew Burgess, Ruth Carson and Winnie Zhu.
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