By Wayne Cole
SYDNEY (Reuters) – U.S. Treasury bonds fell and the dollar strengthened on Monday as investors bet that an attack on U.S. presidential candidate Donald Trump would make him more likely to win, while also injecting a novel level of political uncertainty into markets.
The Japanese holiday kept trading subdued in Asia, with action restricted to a modest dollar gain, bitcoin gains and selling in U.S. bonds. Benchmark 10-year Treasury yields rose nearly five basis points in early London trading.
Investors reacted to the prospect of a Trump victory by pushing up Treasury yields, partly on the assumption that his economic policies would boost inflation and debt.
Proposals to impose tariffs on imports would raise prices while eroding consumer purchasing power. Meanwhile, immigration restrictions could tighten the labor market and put upward pressure on wages.
“The market reaction to Trump’s presidency has been a strengthening US dollar and a steepening US Treasury yield curve. So we may see some changes in the coming week if his election chances improve further after this incident,” said Rong Ren Goh, portfolio manager at Eastspring Investments in Singapore.
Online betting site PredictIT has the Republicans winning at 66 cents, up from 60 cents on Friday, with the Democrats at 38 cents. Current odds suggest the Republicans are twice as likely to win the election as the Democrats.
The dollar rose 0.3% against the Japanese yen to 157.96, but was still well below a recent peak of 161.96 on suspicions of intervention.
The euro weakened slightly to $1.0893, while bitcoin, which is seen to be benefiting from the Trump administration’s easing of regulations, rose about 4% to a two-week high.
Futures for the 10-year Treasury note fell 13 percentage points in the Asian session, while the yield on the 10-year note rose 4.8 basis points to 4.2353% in early cash trading in London.
and Nasdaq futures were slightly higher. Europe futures fell 0.5% and were down 0.3%.
was closed but futures stood at 41,285 while cash balance closed at 41,190.
CHINA FAILS
The disappointing economic data kicked off a busy week in China, where a five-yearly meeting of top officials will be held July 15-18.
The world’s second-largest economy grew 4.7% in the second quarter compared to a year earlier and was lower than analysts’ forecast of 5.1%.
The consumer goods sector was particularly worrisome, with retail sales rising to an 18-month low and novel home prices falling at the fastest pace in nine years.
“Markets are expecting more significant measures to be announced during this week’s plenary session to help the ailing economy and the struggling real estate sector,” said Vasu Menon, managing director of investment strategy at OCBC in Singapore.
The yuan was under pressure, holding at 7.2608 per dollar. Mainland stocks fell, while Hong Kong shares fell 1%. [.SS]
Later this week, the United States will release data on retail sales, industrial production, housing starts and weekly jobless claims.
Federal Reserve Chairman Jerome Powell will appear at the Economic Club of Washington on Monday, where he is likely to be asked for his comment on last week’s low inflation rate.
Markets are pricing in a 94 percent probability of a Fed rate cut in September, up from 72 percent a week earlier.
The European Central Bank will meet on Thursday and is believed to be certain to keep interest rates at 3.75%, ahead of a likely further cut in September.
Companies reporting earnings this week include Goldman Sachs, BlackRock (NYSE:), Bank of America, Morgan Stanley, Netflix (NASDAQ:) and Taiwan Semiconductor Manufacturing.
In commodities markets, gold was trading at $2,408 an ounce, slightly below last week’s peak of $2,424. [GOL/]
Oil prices rose slightly after falling on Friday on signs of progress on the ceasefire between Israel and Hamas. [O/R]
gained 7 cents to $85.10 a barrel, while it rose 15 cents to $82.36 a barrel.
