A shocking assassination attempt on former US President Donald Trump at a rally in Pennsylvania has set off a wave of reactions in financial markets. The initial market response has been characterized by a rush into safe-haven assets like the US dollar, Treasuries, and gold, while "Trump trades" are under renewed scrutiny.
Futures for 10-year Treasuries indicate higher yields as investors price in the potential economic implications of Trump's policies should he win the upcoming election. Traders have historically reacted to a Trump presidency by pushing bond yields upward based on expectations of increased inflation and debt.
Meanwhile, crypto stocks surged alongside Bitcoin, buoyed by Trump presenting himself as a cryptocurrency proponent.
On PredictIt, contracts for a Trump election win were trading at 68 cents, up from 60 cents on Friday, promising a potential $1 payout. Contracts for a Biden victory stood at 26 cents.
The assassination attempt on Trump in Pennsylvania on Saturday seems to have boosted his election prospects. The motive behind the attempt remains unknown, with the suspect killed and the FBI unable to identify any ideology.
Undoubtedly there'll be some protectionist or haven flows in the Asia early morning
Nick Twidale
Managing director at Arbuthnot Latham, Eren Osman, suggested that a potential Trump victory could benefit risk assets, pointing to Bitcoin's significant rally since the weekend. However, he also offered a note of caution.
"It would be reasonable to suggest it invigorates the Trump supporters to go vote, but they were probably the population of voters that were most likely to go and vote anyway," Osman stated.
Dollar index and market trends
The dollar index has risen, supported by gains against the yen, euro, and other major currencies, reflecting the increased demand for safe-haven assets. It edged down 0.04% to 104.25. The euro was marginally lower at $1.0893, while the US Dollar strengthened slightly against the Japanese yen, rising 0.02% to 158.04.
The dollar dropped to 157.15 as Powell spoke, marking its lowest level since June 17, before recovering. Meanwhile, Bitcoin edged slightly higher after a three-week peak of $63,838.86. Gold, traditionally viewed as a haven during times of political uncertainty, has also seen a bump, climbing to a two-week high.
European stocks are poised to open lower today, as EURO STOXX 50 futures indicate a 0.4% decline. Meanwhile, Asian markets closed with mixed results against the backdrop of unfolding news.
Investors are closely monitoring the European Central Bank's upcoming rate decision on Thursday, which is expected to maintain the policy rate at 3.75%. Attention is also focused on Powell's speech at the Economic Club of Washington as betting markets gauge its potential impact on expectations for a September interest rate cut.
Asian markets faced a varied session on Monday, influenced by China's disappointing second-quarter growth data and concerns over home prices, which highlighted ongoing economic health worries. The Chinese yuan, sensitive to tariff tensions, has seen increased volatility as investors weigh the potential implications of a Trump victory.
In commodities, oil prices dipped slightly amid lingering supply concerns and geopolitical tensions in the Middle East.
Market reactions to election volatility
The Trump campaign announced that he is doing well after getting shot in his right ear at a recent rally. In the shooting incident, one attendee was killed, and US Secret Service agents fatally shot the shooter.
Strategists had already anticipated a volatile run-up to the November election due to uncertainty surrounding President Biden's candidacy and concerns about possible disputes or violence. The attack in Pennsylvania adds another layer of complexity to an already unpredictable market environment.
Markets are hoping that more significant measures could be announced during this week's plenary session to help the limping economy and ailing property sector
Vasu Menon
Amidst the heightened uncertainty following the recent security incident involving former US President Donald Trump, market analysts will be vigilantly monitoring asset prices, particularly those associated with the former president's policies, and volatility measures for significant shifts.