By Wayne Cole
SYDNEY (Reuters) – U.S. Treasury futures fell and the dollar rose on Thursday as attacks on U.S. presidential candidate Donald Trump that seemed to make him more likely to win brought new levels of political uncertainty into markets.
Early action saw the dollar edge higher while Treasury futures fell in a thin trading environment due to a Japanese public holiday.
Investors tend to react to the prospect of a Trump victory by pushing up Treasury yields on the assumption that his economic policies would increase inflation and debt.
Proposals to impose tariffs on imports would drive up prices while reducing consumer purchasing power, while immigration restrictions could tighten the labor market and put upward pressure on wages.
“The market reaction to Trump’s inauguration has been characterised by a stronger dollar and a steeper Treasury yield curve, and we may see more of that next week if this incident makes Trump’s chances of winning appear to have improved further,” said Long Leng Goh, portfolio manager at Eastspring Investments in Singapore.
Online betting site PredictIT raised the odds of a Republican victory to 66 cents from 60 cents on Friday, and the odds of a Democratic victory to 38 cents. Under the current odds, Republicans are twice as likely to win the election as Democrats.
The dollar rose 0.3 percent against the Japanese yen to 158.05 yen, far short of its recent record high of 161.96 yen following the intervention allegations.
The euro weakened slightly to $1.0887 and the dollar index rose slightly to 104.26.
Ten-year JGB futures fell 13 ticks and no spot bonds were traded due to a Japanese holiday.
S&P 500 futures and Nasdaq futures both rose slightly.
Japan’s Nikkei Stock Average was closed but futures were trading at 41,285 and spot trading closed at 41,190.
China’s data shortage
China is holding its once-every-five-yearly gathering of top government officials from July 15-18, kicking off a busy week with disappointing data.
China’s second-largest economy grew 4.7 percent year-on-year in the second quarter, beating the 5.1 percent forecast, while retail sales growth in June slowed to an annualized 2 percent, beating the 3.3 percent forecast, putting pressure on the Chinese government to roll out supportive measures.
New home prices fell at the fastest pace in nine years.
The yuan weakened to 7.2608 per dollar, stock prices in mainland China fell and Hong Kong’s Hang Seng Index fell 1%. [.SS]
Later this week the US is due to release data on retail sales, industrial production, housing starts and weekly jobless claims.
Federal Reserve Chairman Jerome Powell is due to appear later on Monday and will be asked how he will respond to last week’s weak inflation readings.
The market now sees a 94% chance that the Fed will cut interest rates in September, up from 72% a week ago.
The European Central Bank meets on Thursday and is expected to keep interest rates on hold at 3.75% ahead of further cuts expected in September.
Companies reporting earnings this week include Goldman Sachs, BlackRock, Bank of America, Morgan Stanley, Netflix and Taiwan Semiconductor Manufacturing Co.
In commodity markets, gold was trading at $2,408 an ounce, just below last week’s record high of $2,424. [GOL/]
Oil prices edged up after falling on Friday amid signs of progress on a ceasefire between Israel and Hamas. [O/R]
Brent crude rose 8 cents to $85.11 a barrel, while U.S. crude rose 8 cents to $82.29 a barrel.
(Reporting by Wayne Cole; Additional reporting by Tom Westbrook in Sydney; Editing by Lisa Shoemaker and Christian Schmollinger)
