(Bloomberg) — The dollar climbed and Treasury futures fell as traders ratcheted up wagers that Donald Trump would win the US presidential election after an assassination attempt.
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The greenback strengthened against every Group-of-10 peer, the Mexican peso slipped and Bitcoin touched its highest in nearly two weeks. The moves reflect bets on the prospect of the Republican’s return to the White House ushering in tax cuts and higher tariffs.
Futures point to a rise in Treasury yields when cash trading starts in Europe, as it’s closed in Asia due to a holiday in Japan. Stocks slipped Asia, with Chinese stocks in Hong Kong extending losses after data showed weakening momentum in the world’s second-largest economy. S&P 500 contracts pointed to a higher US open.
“With markets pricing in a greater possibility of Trump 2.0, the US dollar will likely get some tailwinds while the Mexican peso and Chinese yuan could suffer,” said Charu Chanana, market strategist at Saxo Capital Markets. “Trump trades could be back in focus.”
The Republican’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.
Shares of South Korean defense and nuclear energy firms also climbed, reflecting the ripple effects of US political developments around the world. Bitcoin topped $62,000 on Monday, against the backdrop of Trump increasingly embracing the crypto industry in a bid to court voters.
To be sure, there’s still plenty of room for surprises with almost four months to go in the US election campaign.
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.
“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
Traders are focused on the Third Plenum, a meeting of China’s top leadership that starts Monday, for policy support after economy grew at the worst pace in five quarters. The downbeat data also contributed to a decline in the country’s ten-year bond yield.
Earlier Monday, the People’s Bank of China kept its one-year policy rate unchanged, as expected.
“I guess the weak release is a good set up for the Third Plenum to look into more constructive policies to support the economy,” said Vey-Sern Ling, managing director at Union Bancaire Privee.
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
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.2% as of 12:45 p.m. Tokyo time
Nikkei 225 futures (OSE) rose 0.1%
Australia’s S&P/ASX 200 rose 0.6%
Hong Kong’s Hang Seng fell 1.5%
The Shanghai Composite rose 0.1%
Euro Stoxx 50 futures fell 0.5%
Currencies
The Bloomberg Dollar Spot Index rose 0.1%
The euro fell 0.1% to $1.0895
The Japanese yen was little changed at 157.96 per dollar
The offshore yuan was little changed at 7.2740 per dollar
Cryptocurrencies
Bitcoin rose 4.2% to $62,612.09
Ether rose 3.9% to $3,326.34
Bonds
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Ruth Carson, David Finnerty, John Cheng and Zhu Lin.
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