Asian markets mixed after Trump attacks, analysts focus on impact of US elections

Asian stocks had a mixed performance as the US dollar strengthened following the assassination attempt on President Donald Trump on Saturday, July 13. The Bloomberg Dollar Index rose 0.2% in Asia, while S&P 500 futures were stable and US Treasury futures pointed to rising yields. Australian and South Korean stocks rose, Hong Kong was down 1%, and Shanghai, KOSPI and Jakarta markets were broadly flat.

Meanwhile, markets in Malaysia and the Philippines showed an upward trend, with Bitcoin crossing the $60,000 mark. The Indian market traded slightly higher during the pre-opening session.

Analysts have suggested President Trump’s reelection prospects have improved following Saturday’s attack, and his support for a loose fiscal policy and higher tariffs is seen as a potential boon for the dollar, which could weaken Treasuries.

The sensitivity of longer-dated government bonds was highlighted when yields surged following Joe Biden’s poor performance at last month’s debate, but with nearly four months left in the US election campaign, market participants say surprises are still possible.

Analysts are now assessing the extent to which markets are pricing in an increased chance of Trump’s election. Monday’s market action came after a big week for the Federal Reserve, with economic reports backing up two interest rate cuts in 2024. As the fallout from the Trump shooting fades, analysts will be focusing on a key interest rate decision from the People’s Bank of China and a key closed-door policy meeting.

Nomura’s March report noted that the outcome of the US elections could have a major impact on Asian markets, with North Asian stocks more vulnerable than Indian stocks, especially with President Trump’s policies on trade protectionism and tariffs posing a major risk.

Despite preparations and diversification of production, growth in Asia could take a hit. Trump’s past election intensified U.S.-China trade tensions, impacting markets in Hong Kong and China. His proposed tariffs could have severe global implications, including inflation and changes to supply chains. Overall, a re-election of Trump would be a negative risk for Asia ex Japan (AxJ) stocks, the firm said.

During the trade war of 2018-2019, Indian and U.S. stocks saw modest gains, while South Korea, Hong Kong and Japan were hit hard. The Indian rupee fell more than 10% during that period. Nomura strategists suggest a similar scenario could play out, with India benefiting from shifting its supply chains, limiting its exposure to North Asia and reallocating capital flows. Meanwhile, President Trump’s policies could exacerbate investor concerns about Hong Kong and Chinese stocks.

Meanwhile, Ritesh Jain, veteran fund manager and co-founder of Pinetree Macro, said: Money Control Markets are pricing in the increasing likelihood that Trump will become the next president and weak data coming out of China.

He added that unless the US dollar surges or oil prices soar, he sees no reason for the market to take the assassination attempt any more seriously than other slightly negative market news.

Independent market analyst Ajay Bagga said the biggest event for the market today was the attack at a campaign rally of former US President Donald Trump. The “Trump trade” affected Asian markets at the open as Japan celebrated its Marine Day holiday. Bond futures prices will be clear by the time European markets open at noon in India. The US dollar strengthened as the market saw the assassination attempt as a boost to Trump’s chances of winning and expected more deregulation, tax cuts, increased debt and deficit, and higher tariffs, especially on China. Safe haven moves and earnings announcements will drive market sentiment today.

VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said the assassination attempt on President Trump will have a positive impact on safe haven assets like gold and the dollar in the short term. In the medium term, this increases the chances of President Trump winning the November elections and therefore the “Trump trade” is likely to gain momentum on hopes of lower interest rates and liberalisation of the regulatory framework. However, if President Trump wins the election and imposes high tariffs on Chinese imports, it could trigger a trade war with China, which could impact global trade and global economic growth.

Amit Pabari, founder and CEO of CR Forex, noted that the initial market reaction was in favor of safe haven assets such as Treasuries and gold, while stocks were discouraged. Despite its safe haven status, the dollar was sold off on the prospect of a Fed rate cut in September following weak economic data. The assassination attempt boosted Donald Trump’s election prospects, which could lead to more aggressive trade policies and deregulation. This may attract foreign investment, but could also bring market volatility due to the possibility of new tariffs and trade deals. Moreover, expected Fed monetary easing next year could increase volatility in the asset class.