Asian markets mixed after Trump attack, analysts watch impact of US election

Asian equities showed a mixed performance as the US dollar gained strength following an assassination attempt on Donald Trump on Saturday, July 13. The Bloomberg Dollar Index in Asia rose 0.2%, while S&P 500 futures were steady and US Treasury futures showed rising yields. Australian and South Korean stocks posted gains, Hong Kong saw a 1% decline, and markets in Shanghai, Kospi and Jakarta were relatively unchanged.

Meanwhile, the Malaysian and Philippine markets showed an upward movement and Bitcoin crossed the $60,000 mark. The Indian markets traded slightly higher during the pre-opening session.

Analysts say Trump’s re-election prospects have improved following Saturday’s attack. His advocacy of loose fiscal policy and higher tariffs is seen as potentially beneficial for the dollar and could weaken Treasury bonds.

Yields jumped following Joe Biden’s poor performance at the debate last month, highlighting the sensitivity of longer-term government bonds. But with nearly four months left in the US election campaign, market participants say surprises are still possible.

Analysts are currently assessing how much of Trump’s rising election chances are already priced into the markets. Monday’s market activity follows a crucial week for the Federal Reserve, with economic reports supporting bets on two rate cuts in 2024. As the impact of the Trump assassination attempts fades, analysts will focus on the People’s Bank of China’s policy rate decision and a key closed-door monetary policy meeting.

A report by Nomura published in March said the outcome of the US election could have a significant impact on the Asian market, with North Asian equities being more vulnerable than those in India, although Trump’s policies, particularly in terms of trade protectionism and tariffs, are a key risk.

Despite preparations and diversified production, Asia’s growth could suffer. Trump’s last election exacerbated trade tensions between the US and China and affected markets in Hong Kong and China. His proposed tariffs could have serious global consequences, including inflation and supply chain shifts. Overall, a second Trump term would be a negative risk for equities in the Asia ex Japan (AxJ) region, it said.

During the 2018-2019 trade war, Indian and US equities posted modest gains while South Korea, Hong Kong and Japan were hit hard. The Indian rupee fell over 10% during this period. Nomura strategists believe a similar scenario could play out, with India benefiting from supply chain shifts, limited exposure to North Asia and reallocation of flows. Meanwhile, Trump’s actions could add to investors’ concerns about Hong Kong and China equities.

Meanwhile, veteran fund manager and co-founder of Pinetree Macro, Ritesh Jain, said Money control that markets are taking into account the increased likelihood of Trump becoming the next president as well as weak data from China.

He went on to say that unless the US dollar or oil prices rise sharply, he sees no reason why markets should take this assassination attempt more seriously than other slightly negative market news.

Independent market analyst Ajay Bagga said the dominant event for markets today was the attack on former US President Donald Trump at a campaign rally. The “Trump trade” influenced Asian markets at their open while Japan observed “Marine Day.” Bond futures prices will be clearer at the European open at 12 noon in India. The US dollar gained as markets believed the assassination attempt boosted Trump’s election chances, leading to expectations of less stringent regulations, lower taxes, higher debt and deficits, and higher tariffs, especially against China. Safe havens and earnings announcements will dominate market sentiment today.

VK Vijayakumar, chief investment strategist at Geojit Financial Services, said: The assassination attempt on Trump will have a positive impact on safe-haven assets like gold and the dollar in the short term. In the medium term, it strengthens Trump’s chances of winning the November elections and hence the ‘Trump trade’ is likely to gain momentum on expectations of rate cuts and liberalisation of the regulatory framework. However, if Trump wins the election and imposes high tariffs on imports from China, it is likely to trigger a trade war with China, which could potentially affect global trade and growth.

Amit Pabari, founder and CEO of CR Forex, noted that the initial market reaction favored safe-haven assets such as U.S. Treasuries and gold, while equities faced aversion. Despite its safe-haven status, the dollar was sold off on expectations of a Fed rate cut in September following weak economic data. The assassination attempt has boosted Donald Trump’s election chances, which could lead to more aggressive trade policies and less regulation. While this could attract foreign investment, it could also lead to market volatility due to possible new tariffs and trade deals. In addition, the expected Fed monetary easing next year could increase volatility in the asset class.