Dollar Up, Bond Futures Down on Trump-Win Bets: Markets Wrap

(Bloomberg) — The dollar rose 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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A Bloomberg gauge of the greenback’s strength against peers climbed 0.2%, the Mexican peso slipped and Bitcoin touched its highest in more than a week. 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 momentum in the world’s second-largest economy weakened more than expected. 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.”

Trump’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.

To be sure, there’s still plenty of room for surprises with almost four months to go in the US election campaign.

Shares of South Korean defense and nuclear energy firms also climbed, reflecting the ripple effects of US political developments around the world. Bitcoin touched $61,000 on Monday, against the backdrop of Trump increasingly embracing the crypto industry in a bid to court voters.

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.”

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China

Traders will also be focused on the start of the Third Plenum, a meeting of China’s top leadership that’s expected to set long-term policy on a wide range of economic and political issues.

The People’s Bank of China kept its one-year policy rate unchanged, as expected. Economic growth fell to the worst pace in five quarters, data on Monday showed, adding pressure on Beijing to boost confidence.

“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 11:23 a.m. Tokyo time

• Nikkei 225 futures (OSE) rose 0.2%

• Australia’s S&P/ASX 200 rose 0.9%

• Hong Kong’s Hang Seng fell 0.9%

• The Shanghai Composite was little changed

• Euro Stoxx 50 futures fell 0.5%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%

• The euro fell 0.2% to $1.0887

• The Japanese yen fell 0.2% to 158.11 per dollar

• The offshore yuan was little changed at 7.2775 per dollar

Cryptocurrencies

• Bitcoin rose 2.4% to $61,583.88

• Ether rose 2.4% to $3,278.25

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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