(Bloomberg) — U.S. stock futures pointed to gains on bets on a second Donald Trump presidency and traders’ expectations of U.S. retail sales later in the day that would influence the Federal Reserve’s rate cut decision.
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S&P 500 contracts rose 0.1% as traders see a higher chance of a Trump victory after he survived an assassination attempt. In addition, Fed Chairman Jerome Powell’s comment that inflation is heading towards the central bank’s 2% target boosted sentiment. European futures traded lower ahead of Thursday’s European Central Bank interest rate decision.
The dollar strengthened against most of its Group of 10 peers. The yen fell against the dollar on bets that the Japanese currency will remain weak during Trump’s second term. U.S. 10-year Treasury yields fell slightly ahead of U.S. retail sales.
“Current expectations point to a more subdued situation for US consumers, with June retail sales expected to remain flat on a monthly basis, down from the previous 0.1%,” wrote Jun Rong Yeap, market strategist at IG Asia Pte. “That could continue to strengthen market expectations for a Fed rate cut in September.”
Meanwhile, the MSCI AC Asia Pacific index fell 0.3%, marking its third day of losses. Hong Kong stocks fell the most in the region, while some stocks in China traded lower as bets on a second term for Trump following his running mate announcement sparked further trade and geopolitical concerns in the region. Stocks in Japan rose, with exporters benefiting from the yen’s decline.
Investors have been dividing their stocks based on which countries will be seen as friends or foes by Trump, said Kyle Rodda, a senior analyst at Capital.com in Melbourne. “His view of the world is quite zero-sum,” with Japan on friendly terms and China in the “bad books,” he said in an interview. “There is certainly still figurative pairs trading going on at the moment, namely long Japan and short China.”
The Dow Jones Industrial Average hit an all-time high when Trump named JD Vance as his running mate. Trump Media & Technology Group Corp. increased by 31%. The increasing chances of a Trump victory also boosted oil producers, arms manufacturers and private prisons. His pro-cryptocurrency stance has given the industry a boost. Solar companies declined as Democrats are seen as friendlier to the industry.
Vance is 39, nearly four decades younger than Trump, 78, and offers a fresh voice to Republican efforts to strengthen their appeal to the working-class people who once formed a foundation of the Democratic party in battleground states like Michigan, Wisconsin and Pennsylvania.
“The decision is crucial because a third of US presidents in US history have previously held the position of vice president,” said Tom McLoughlin of UBS Global Wealth Management. “Additionally, Trump’s decision in this case effectively anoints Vance as his successor in terms of delivering a populist message to a younger generation of voters.”
Powell said in an interview that second-quarter economic data has given policymakers more confidence that inflation is heading toward the central bank’s 2% target, potentially paving the way for near-term rate cuts. He made clear that he did not intend to send a specific message on the timing of the rate cuts.
Back in Asia, outflows from U.S. exchange-traded funds tracking Chinese stocks continued for a sixth straight week as weaker economic data and the implications of a Trump victory spooked investors — even before Saturday’s assassination attempt. The world’s second-largest economy recorded net outflows of $229.4 million from this group of ETFs last week.
New tariffs of 60% on all Chinese exports to the US would more than halve China’s annual growth, according to new research from UBS Group AG. This underlines the risks for Beijing if Trump returns to the White House. Senator Vance of Ohio, Trump’s choice as running mate, tells Fox News that China is the biggest threat to the US.
In corporate news, shares of Energy Absolute Pcl in Thailand fell as much as 30% after the biodiesel product developer’s founder and managing director quit amid a fraud investigation and the company’s credit rating was downgraded to ‘junk’.
In the commodities sector, oil prices fell for a third day on concerns about weak Chinese demand and the impact of a stronger dollar. Gold rose for a second day.
Main events this week:
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US retail sales, Tuesday
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Morgan Stanley, Bank of America earnings, Tuesday
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The Fed’s Adriana Kugler will speak on Tuesday
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Eurozone CPI, Wednesday
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Start of the US housing market, industrial production, Wednesday
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Fed Beige Book, Wednesday
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The Fed’s Thomas Barkin will speak on Wednesday
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ECB interest rate decision, Thursday
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US Initial Unemployment Claims, Philadelphia Fed Production, Conference Board LEI, Thursday
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The Fed’s Mary Daly, Lorie Logan and Michelle Bowman will speak Thursday
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Feds John Williams and Raphael Bostic will speak Friday
Some of the major moves in the markets:
Shares
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S&P 500 futures rose 0.2% as of 2:34 p.m. Tokyo time
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Nasdaq 100 futures rose 0.3%
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Japan’s Topix rose 0.6%
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Australia’s S&P/ASX 200 fell 0.1%
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Hong Kong’s Hang Seng fell 1.3%
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The Shanghai Composite had changed little
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Euro Stoxx 50 futures fell 0.2%
Currencies
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The Bloomberg Dollar Spot Index rose 0.1%
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The euro was little changed at $1.0889
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The Japanese yen fell 0.4% to 158.75 per dollar
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The offshore yuan was little changed at 7.2796 per dollar
Cryptocurrencies
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Bitcoin rose 0.6% to $64,136.95
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Ether rose 0.4% to $3,448.66
Bonds
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The yield on ten-year government bonds fell by two basis points to 4.21%
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The Japanese ten-year yield fell by 2.5 basis points to 1.020%
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The Australian ten-year yield fell by seven basis points to 4.25%
Raw materials
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West Texas Intermediate crude fell 0.4% to $81.56 a barrel
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Spot gold rose 0.4% to $2,431.32 an ounce
This story was produced with the help of Bloomberg Automation.
–With help from Matthew Burgess, Masaki Kondo, and Ruth Carson.
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