Author: Chiu Stella
SYDNEY (Reuters) – Asian shares outside Japan edged lower on Tuesday as investors pondered what a Trump victory would mean for China, while the yen resumed its slide, prompting officials to issue fresh warnings after suspected intervention last week.
Europe opened lower, with EUROSTOXX 50 futures down 0.3%. Dovish comments from the Federal Reserve sparked bets on further U.S. interest rate cuts this year, boosting Wall Street, with Nasdaq futures rising 0.2% and Nasdaq futures rising 0.3%.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.3%, extending Monday’s 0.3% loss. The index rose 0.3% after a public holiday in Japan.
Overnight, investors continued to digest the impact of Saturday’s assassination attempt on former U.S. President Trump, who on Monday nominated J.D. Vance as his vice presidential running mate.
Polls show a close race between Trump and President Joe Biden, although Trump leads in several battleground states that could decide the election.
The Dow hit a new closing high thanks to energy and bank stocks. Gold prices climbed to record highs and the yield curve steepened as investors favored so-called Trump victory deals.
“J.D. Vance is in the camp of attacking China first in order to improve the U.S. trade deal, which will only undermine confidence in China,” said Chris Weston, director of research at Pepperstone.
The index fell 0.1% and Hong Kong stocks fell 1.4%, having fallen 1.5% the previous day, as weak economic data from China increased the risk that Beijing may miss its 5% growth target this year unless strong stimulus measures are implemented.
Taiwan and South Korea stocks both rose 0.2%.
Federal Reserve Chairman Jerome Powell said on Monday that three U.S. second-quarter inflation data did “increase to some extent people’s confidence that inflation is returning to the Fed’s goal in a sustainable manner.”
The market has now fully priced in the impact of the Federal Reserve’s 25 basis point interest rate cut in September, and is expected to cut interest rates by a total of 68 basis points (bps) by the end of the year.
That dampened gains in the greenback overnight, although it gained 0.1% against a basket of major currencies on Tuesday amid renewed weakness in the yen.
The yen fell 0.4% to $158.67, struggling to hold on to gains after Tokyo’s suspected intervention last week disrupted a popular carry trade.
Japanese officials also issued fresh warnings, saying the government was ready to take all possible measures to deal with excessive currency movements.
“I’m actually buying the dollar here. I think the dollar may have bottomed out right now,” said IG analyst Tony Sycamore. “We’ve had the reaction from soft CPI data and a dovish Powell. I think the dollar The risk is to the upside.”
“The idea that a Trump administration is more likely to be in the White House and raise tariffs on China is not a good thing for Chinese stocks at all. Put that together with a higher dollar and rising yields, and I think it’s going to be a negative for the economy.” This is a difficult time to be alive.
Long-term government bonds are gaining ground in Asia, with the 10-year yield falling 2 basis points to 4.2060% after rising 4 basis points overnight.
Gold rose 0.3% to $2,428.67 an ounce, near a record high. [GOL/]
Oil prices fell on concerns that a slowdown in China’s economy will dampen demand. [O/R]
Futures fell 0.3% to $84.63 a barrel, while U.S. West Texas Intermediate (WTI) crude fell 0.3% to $81.64 a barrel.
