Hong Kong: Markets wobbled on Tuesday as growing expectations that Donald Trump would return to the White House played against renewed hopes that the Federal Reserve will cut interest rates at least once this year.
Traders sought to extend gains on Wall Street, where the Dow hit its first record high since May, while the dollar rose on Treasury earnings on speculation that Trump’s next tariff battle with China and likely tax cuts could push inflation higher.
Recent polls show the former president’s chances of defeating incumbent Joe Biden have increased since the weekend assassination attempt, while his choice of JD Vance as his running mate suggests a continuation of the America First agenda.
“Increased market confidence following Saturday’s failed assassination attempt that Donald Trump will be re-elected president in November has been reflected in market movements across US Treasuries, equities and currencies since the weekend,” said National Australia Bank’s Ray Attrill.
“The US yield curve is steepening, the dollar is slightly higher and energy and banking stocks are leading the S&P500.”
While the Dow led gains in New York, Asian investors were a bit more cautious.
Hong Kong fell more than one percent due to further losses in the technology sector, while Sydney, Singapore, Manila, Bangkok and Jakarta also fell, although Tokyo, Seoul, Wellington, Taipei and Mumbai rose slightly.
Shanghai was slightly higher, with traders awaiting policy action from China’s leaders as they host a key economic meeting this week.
London opened lower, while Paris and Frankfurt were also down.
There was some support after a recent upbeat assessment of inflation after Fed Chair Jerome Powell repeated comments pointing to a possible rate cut.
“We didn’t get any additional confidence in the first quarter, but the three figures in the second quarter, including last week, are boosting confidence a little bit,” he said in an interview with the Economic Club’s David Rubenstein. Washington DC.
He added: “If we were to see an unexpected weakening in the labor market, then that could also be a reason for our reaction.”
Powell’s remarks came after he told lawmakers last week that Fed officials need not wait for inflation to fall to their 2 percent target before cutting.
Also on Monday, San Francisco Fed chief Mary Daly said optimism was growing that the battle against rising prices had been won, though she said she wanted to see more data.
Dovish comments last week sent bets on September rate cuts soaring, while some traders expect as many as three before the end of the year.
Despite this, the dollar held its gains as the possibility of a Trump victory increases. “The confluence of political developments, economic data and central bank action continues to create a complex environment for global currencies,” said Luca Santos, market analyst at ACY Securities.
