Dollar Falls as Biden Drops Out of Race, Chinese Bonds Gain: Markets Join In

(Bloomberg) — The dollar fell and Treasury bonds rose after Joe Biden ended his reelection campaign and endorsed Vice President Kamala Harris. Chinese bonds rose after the central bank cut policy rates.

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Yields on Chinese 10-year government bonds fell almost 2 basis points after the People’s Bank of China cut short-term interest rates for the first time in almost a year, boosting support for growth. Benchmark bond futures with the same maturity rose to a record.

Chinese shares fell, adding to regional losses from Japan to Australia, amid weakness in the technology sector. Taiwan Semiconductor Manufacturing Co. fell as much as 3.3%. US stock futures rose slightly.

China’s policy easing is “a recognition that there is enormous economic downward pressure,” Michelle Lam, Greater China economist at Societe Generale, told Bloomberg TV. “It also signals that policymakers are committed to supporting the economy.”

A Bloomberg gauge of the strength of the U.S. currency fell 0.1%, while 10-year Treasury yields fell 1 basis point. The Mexican peso climbed, gold gained and Bitcoin rose to its highest level in more than a month.

Investors have been nursing a heightened prospect for weeks that Donald Trump will win the November election after Biden’s weak debate performance, only as betting on a Trump victory accelerated last week following an assassination attempt on the Republican candidate a week ago. The question for investors is whether they should stick with such trades now that Biden has dropped his bid for re-election.

“For the second week in a row, the Asian market is facing surprising surprises,” said Hebe Chen, analyst at IG Markets. “The accelerating wave of risk aversion could hit Asian stocks harder than the week before as investors digest the unfamiliar political context. The forex market will also feel the increased pressure.”

The S&P 500 fell 0.7% on Friday, capping its worst week since April. Tech stocks fell ahead of this week’s earnings reports as CrowdStrike Holdings Inc., the company behind a massive IT outage that grounded flights and disrupted businesses around the world, fell as much as 15% before paring losses .

Tesla Inc. and Alphabet Inc. will be the first of the “Magnificent Seven” to report earnings on Tuesday. Analysts are likely to press Elon Musk’s electric car giant over the progress of its robotaxis plans. And investors will be digging into the details of Google’s parent revenue boost through artificial intelligence.

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Back in China, banks cut their key interest rate for the first time since August 2023, boosting support for economic growth following the PBOC rate cut.

President Xi Jinping this weekend unveiled sweeping plans to shore up the finances of China’s debt-ridden local governments, as the ruling Communist Party announced its long-term blueprint for the world’s second-largest economy. These aim to shift more revenue from central to local treasuries, for example by allowing regional governments to receive a larger share of consumption taxes.

Elsewhere this week, traders will focus on data on economic activity in Europe, second-quarter growth in the US and a slew of corporate earnings. The Bank of Canada will make an interest rate decision while the Federal Reserve’s preferred inflation measure also takes effect.

Main events this week:

• CPI Hong Kong, Monday

• Taiwan’s unemployment rate, export orders, Monday

• Retail sales in Mexico, Monday

• Israeli Prime Minister Benjamin Netanyahu will visit Washington on Monday

• EU foreign ministers will meet in Brussels on Monday

• Singapore CPI, Tuesday

• Industrial production in Taiwan, Tuesday

• India’s budget for the financial year to March 2025, Tuesday

• Tariff decision Turkey, Tuesday

• Consumer confidence in the eurozone, Tuesday

• Alphabet, Tesla, LVMH earnings, Tuesday

• Malaysia CPI, Wednesday

• CPI South Africa, Wednesday

• Hcob PMI eurozone, Wednesday

• UK S&P Global PMI, Wednesday

• Tariff decision Canada, Wednesday

• IBM, Deutsche Bank earnings results, Wednesday

• ECB Vice President Luis de Guindos will speak on Wednesday

• Trading in Hong Kong, Thursday

• South Korea’s GDP, Thursday

• US GDP, initial jobless claims, durable goods, merchandise trade, Thursday

• G-20 finance ministers and central bankers will meet in Rio de Janeiro from Thursday to Friday

• Bitcoin 2024 conference in Nashville, Thursday through July 27

• Japan Tokyo CPI, Friday

• U.S. personal income, PCE price index, University of Michigan consumer confidence, Friday

• Trade in Mexico, Friday

Some of the major moves in the markets:

Shares

• Futures on the S&P 500 were little changed at 11:11 a.m. Tokyo time

• Nikkei 225 futures (OSE) fell 0.7%

• Japan’s Topix fell 0.9%

• Australia’s S&P/ASX 200 fell 0.9%

• Hong Kong’s Hang Seng fell 0.4%

• The Shanghai Composite fell 0.9%

• Euro Stoxx 50 futures rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0887

• The Japanese yen was little changed at 157.60 per dollar

• The offshore yuan was little changed at 7.2915 per dollar

Cryptocurrencies

• Bitcoin rose 0.1% to $67,831.62

• Ether rose 0.8% to $3,525.11

Bonds

Raw materials

• West Texas Intermediate crude rose 0.4% to $80.49 a barrel

• Spot gold rose 0.2% to $2,406.62 an ounce

This story was produced with the help of Bloomberg Automation.

–With assistance from Joanna Ossinger, Richard Henderson, Matthew Burgess, Ruth Carson, and Winnie Zhu.

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