(Bloomberg) — The dollar advanced and Treasury futures fell as investors ratcheted up wagers that Donald Trump would win the US presidential election after an assassination attempt.
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The greenback strengthened against all other Group-of-10 currencies, the Mexican peso slipped and Bitcoin touched its highest in nearly two weeks. Futures pointed to a rise in Treasury yields when cash trading starts in Europe.
The moves reflect bets on the prospect of the Republican’s return to the White House ushering in looser fiscal policy and higher tariffs, which are generally viewed as likely to benefit the dollar and weaken Treasuries.
Stocks slipped Asia, with Chinese stocks in Hong Kong extending losses after data showed weakening momentum in the world’s second-largest economy. Indian shares climbed and 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.”
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. Both Chair Jerome Powell and San Francisco Fed President Mary Daly are due to speak later on Monday.
“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
The decline in Chinese stocks in Hong Kong Monday partly reflects “an element of front running the increased odds of 60% tariffs placed on Chinese exports” following a potential Trump win, Chris Weston, head of research at Pepperstone, wrote in a note.
Traders are also 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.
Metals, including iron ore and copper, rose on the soft economic data, buttressed by expectations the country will announce stimulus measures.
“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.
Earlier Monday, the People’s Bank of China kept its one-year policy rate unchanged, as expected.
Key events this week:
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Eurozone industrial production, Monday
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US Empire State Manufacturing, Monday
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Goldman Sachs earnings, Monday
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Jerome Powell is interviewed by David Rubinstein, Monday
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Fed’s Mary Daly speaks, Monday
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Germany ZEW survey expectations, Tuesday
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US retail sales, business inventories, Tuesday
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Morgan Stanley, Bank of America earnings, Tuesday
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Fed’s Adriana Kugler speaks, Tuesday
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Eurozone CPI, Wednesday
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US housing starts, industrial production, Wednesday
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Fed Beige Book, Wednesday
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Fed’s Thomas Barkin speaks, Wednesday
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ECB rate decision, Thursday
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US initial jobless claims, Philadelphia Fed manufacturing, Conference Board LEI, Thursday
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Fed’s Mary Daly, Lorie Logan and Michelle Bowman speak, Thursday
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Fed’s John Williams, Raphael Bostic speak, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures rose 0.2% as of 1:46 p.m. Tokyo time
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Nikkei 225 futures (OSE) rose 0.2%
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Australia’s S&P/ASX 200 rose 0.6%
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Hong Kong’s Hang Seng fell 1.4%
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The Shanghai Composite rose 0.1%
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Euro Stoxx 50 futures fell 0.6%
Currencies
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The Bloomberg Dollar Spot Index rose 0.1%
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The euro fell 0.1% to $1.0893
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The Japanese yen fell 0.1% to 158.02 per dollar
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The offshore yuan was little changed at 7.2754 per dollar
Cryptocurrencies
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Bitcoin rose 4% to $62,531.65
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Ether rose 4.2% to $3,334.55
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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