(Bloomberg) — The dollar fell and Asian stocks fell after Joe Biden ended his re-election campaign and endorsed Vice President Kamala Harris. The Chinese central bank has cut its key short-term interest rate.
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A Bloomberg gauge of the strength of the US currency lost 0.1% on Monday after the US president bowed to pressure from Democrats, while the yen and Swiss franc rose. The Mexican peso also rose. U.S. stock futures rose, while 10-year Treasury yields in Asia fell.
Stocks fell from Japan to South Korea and Australia. Futures for Hong Kong shares pointed to a steady opening. The People’s Bank of China cut funding costs for a popular money market loan for the first time in almost a year, boosting support for growth while switching to a new policy benchmark.
Investors have been nursing a heightened prospect for weeks that Donald Trump will win the November election after Biden’s weak debate performance, only as betting on a Trump victory accelerated last week following an assassination attempt on the Republican candidate a week ago. The question for investors is whether they should stick with such trades now that Biden has dropped his bid for re-election.
“For the second week in a row, the Asian market is facing surprising surprises,” said Hebe Chen, analyst at IG Markets. “The accelerating wave of risk aversion could hit Asian stocks harder than the week before as investors digest the unfamiliar political context. The forex market will also feel the increased pressure.”
In the commodities sector, oil and gold rose in early trading on Monday.
The S&P 500 fell 0.7% on Friday, capping its worst week since April. Tech stocks fell ahead of this week’s earnings reports as CrowdStrike Holdings Inc., the company behind a massive IT outage that grounded flights and disrupted businesses around the world, fell 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 are likely to press Elon Musk’s electric car giant over the progress of its robotaxis plans. And investors will be digging into the details of Google’s parent revenue boost through artificial intelligence.
Instead, President Xi Jinping this weekend unveiled sweeping plans to shore up the finances of China’s debt-ridden local governments, as the ruling Communist Party announced its long-term blueprint for the world’s second-largest economy. These aim to shift more revenue from central to local treasuries, for example by allowing regional governments to receive a larger share of consumption taxes.
“Like most such documents, it did not address how China’s leaders intended to achieve these goals, many of which require policies that are contradictory in nature,” said Bob Savage, head of markets strategy and insights at BNY Mellon. “The contradiction between Chinese growth and stability hangs over APAC markets and flows, meaning the Chinese yuan and commodities remain a key focus.”
Investors will wait to see whether Chinese interest rates on one- and five-year loans will also fall later Monday, following the PBOC’s decision to cut money market rates.
Elsewhere this week, traders will focus on data on economic activity in Europe, second-quarter growth in the US and a slew of corporate earnings. The Bank of Canada will make an interest rate decision while the Federal Reserve’s preferred inflation measure also takes effect.
Main events this week:
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Prime rates for Chinese loans, Monday
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CPI Hong Kong, Monday
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Taiwan’s unemployment rate, export orders, Monday
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Retail sales in Mexico, Monday
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Israeli Prime Minister Benjamin Netanyahu will visit Washington on Monday
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EU foreign ministers will meet in Brussels on Monday
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Singapore CPI, Tuesday
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Industrial production in Taiwan, Tuesday
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India’s budget for the financial year to March 2025, Tuesday
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Tariff decision Turkey, Tuesday
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Consumer confidence in the eurozone, Tuesday
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Alphabet, Tesla, LVMH earnings, Tuesday
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Malaysia CPI, Wednesday
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CPI South Africa, Wednesday
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Hcob PMI eurozone, Wednesday
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UK S&P Global PMI, Wednesday
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Tariff decision Canada, Wednesday
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IBM, Deutsche Bank earnings results, Wednesday
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ECB Vice President Luis de Guindos will speak on Wednesday
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Trading in Hong Kong, Thursday
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South Korea’s GDP, Thursday
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US GDP, initial jobless claims, durable goods, merchandise trade, Thursday
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G-20 finance ministers and central bankers will meet in Rio de Janeiro from Thursday to Friday
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Bitcoin 2024 conference in Nashville, Thursday through July 27
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Japan Tokyo CPI, Friday
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U.S. personal income, PCE price index, University of Michigan consumer confidence, Friday
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Trade in Mexico, Friday
Some of the major moves in the markets:
Shares
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S&P 500 futures rose 0.3% as of 9:30 a.m. Tokyo time
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Hang Seng futures were little changed
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Japan’s Topix fell 0.8%
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Australia’s S&P/ASX 200 fell 0.7%
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Euro Stoxx 50 futures fell 1.1%
Currencies
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The Bloomberg Dollar Spot Index fell 0.2%
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The euro rose 0.1% to $1.0894
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The Japanese yen was little changed at 157.42 per dollar
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The offshore yuan was little changed at 7.2889 per dollar
Cryptocurrencies
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Bitcoin rose 0.7% to $68,229.85
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Ether rose 1.1% to $3,537.95
Bonds
Raw materials
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West Texas Intermediate crude rose 0.5% to $80.55 a barrel
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Spot gold rose 0.3% to $2,409.20 an ounce
This story was produced with the help of Bloomberg Automation.
–With assistance from Joanna Ossinger, Richard Henderson, Matthew Burgess, Ruth Carson, and Winnie Zhu.
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