Asian stock markets experienced an upswing as investors geared up for the impending US election and vital economic indicators that will influence the next Federal Reserve decision. Equities rose in Hong Kong, Tokyo, and Australia, while Chinese shares showed mixed results. Meanwhile, US futures dipped slightly after a strong start to the week for most S&P 500 sectors, coinciding with the busiest period for corporate earnings. Treasury yields also saw a decline.
The financial landscape is increasingly influenced by the possibility of Donald Trump returning to the presidency, with current polling indicating a competitive race against Vice President Kamala Harris. In the cryptocurrency sector, companies saw a surge, with Bitcoin surpassing $70,000 for the first time since June, as Trump’s potential presidency is perceived as favorable for digital assets.
A Trump victory could prove more advantageous for both the stock market and Bitcoin compared to a Harris administration. According to a Bloomberg Markets Live Pulse survey, 38% of participants predict that stock performance will improve significantly under Trump, while only 13% believe the same under Harris.
Phillip Wool, head of portfolio management at Rayliant Global Advisors, noted, “Trump’s rising chances of winning are viewed positively for US stocks in the short term. This scenario could lead to increased deficits, a resurgence in inflation, and slower rate cuts from the Fed, thereby putting upward pressure on the dollar and posing challenges for other Asian economies.”
As the US election countdown intensifies, the week ahead is crucial for investors, with corporate earnings reports and economic data expected to shape market trends. With the Federal Reserve poised to deliberate on the timing of rate cuts, forthcoming data is anticipated to reveal underlying strength in the US economy alongside a temporary slowdown in job growth.
Investors are keenly awaiting earnings results from companies comprising nearly 42% of the S&P 500’s market capitalization, including major technology players like Apple Inc., Microsoft Corp., and Meta Platforms Inc.
“Attention is shifting to the earnings of mega-cap companies, starting today with Google (Alphabet),” stated Charu Chanana, chief investment strategist at Saxo Markets. “There remains a strong belief that AI spending will persist, potentially driving broader equity momentum.”
In currency markets, the Japanese yen appreciated following Prime Minister Shigeru Ishiba’s commitment to restore political stability after his coalition’s recent electoral challenges. Market participants are also anticipating a Bank of Japan policy decision later this week. Recent data revealed a tightening labor market in Japan, indicating ongoing pressure on companies to increase wages ahead of the BOJ meeting.
The dollar index held steady while 10-year Treasury yields declined after a previous rise amid weak demand in two note auctions.
In a separate development, the Biden administration has finalized restrictions on investments by US individuals and corporations in advanced technology sectors in China, including semiconductors, quantum computing, and artificial intelligence.
Additionally, data indicated that investors withdrew funds from exchange-traded funds focused on Chinese stocks last week, interrupting a streak of inflows as recent stimulus measures failed to impress.
In corporate news, Nippon Paint Holdings Co. saw its shares surge by as much as 24% in early Tokyo trading, marking the largest intraday gain in 24 years, following its announcement to acquire global chemicals formulator AOC for $2.3 billion.
HSBC is set to report its third-quarter earnings on Tuesday, with particular attention on the bank’s restructuring plans. Traders will also look for insights into Adani Enterprises Ltd.’s fundraising strategies and the performance of its coal trading and airport divisions when the Adani Group’s flagship company shares its quarterly results.
In the commodities market, oil prices inched upward after a significant drop of approximately 6% on Monday, as market sentiment shifted towards the potential easing of tensions in the Middle East and forthcoming US economic data. Gold also edged closer to a record high.
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