(Bloomberg) — Chinese government bonds rose after the People’s Bank of China cut its key policy interest rate, while the dollar fell after Joe Biden ended his reelection campaign with an endorsement for Vice President Kamala Harris.
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China’s 10-year government bond yields fell nearly 2 basis points after the People’s Bank of China stepped up measures to support economic growth and cut short-term interest rates for the first time in nearly a year. The country’s 10-year bond futures rose to a record high.
Chinese shares fell in early trade, adding to losses in regional stocks from Japan to Australia amid continued weakness in the technology sector. U.S. stock futures edged up.
A Bloomberg gauge of U.S. currency strength fell 0.1% on Monday, while U.S. Treasuries were flat. The Mexican peso strengthened, gold rose and bitcoin rose to a one-month high.
For weeks, investors had been betting that Biden’s weak debate performances were boosting prospects for Donald Trump to win the November presidential election, but last week’s assassination attempt on the Republican candidate accelerated bets that Trump would win. The question for investors is whether to continue those trades now that Biden has given up on reelection.
“Faced with a second consecutive week of shock surprises, Asian markets will be under intense scrutiny,” said Hebe Chen, analyst at IG Markets. “Asian stocks are likely to take a bigger hit than last week as risk aversion accelerates as investors digest unfamiliar political conditions. Forex markets will also feel the increased pressure.”
The S&P 500 fell 0.7% on Friday, its worst week since April. Technology stocks fell ahead of earnings reports this week, while CrowdStrike Holdings Inc., whose massive IT outage grounded flights and disrupted businesses around the world, slid as much as 15% before paring its losses.
Tesla and Alphabet are the first of the “Magnificent Seven” to report earnings on Tuesday, as analysts press Elon Musk’s electric-car giant on the progress of its robotaxi program, while investors scrutinize details of parent company Google’s revenue growth from artificial intelligence.
Instead, President Xi Jinping unveiled a comprehensive plan over the weekend to shore up debt-ridden local government finances as the Communist Party unveiled its long-term blueprint for the world’s second-largest economy. The plan centers on shifting revenue from the central government to local governments, including by allowing them to receive more sales tax.
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“Like most documents of this nature, it does not say how China’s leaders intend to achieve these goals, many of which will require inherently contradictory policies,” said Bob Savage, head of market strategy and insights at BNY Mellon. “The contradiction between China’s growth and stability casts a shadow over Asia-Pacific markets and capital flows, with the Chinese yuan and commodities remaining a key focus.”
Chinese banks stepped up support for economic growth after the People’s Bank of China cut its key benchmark lending rate for the first time since August 2023.
This week, traders will be focusing on economic activity data from Europe, second-quarter growth in the U.S. and a slew of corporate earnings. The Bank of Canada is due to release its interest rate decision, as well as the Federal Reserve’s preferred inflation gauge.
Major events this week:
Hong Kong CPI, Monday
Taiwan unemployment rate, export orders on Monday
Mexican retail sales Monday
Israeli Prime Minister Benjamin Netanyahu will visit Washington on Monday.
EU foreign ministers meet in Brussels on Monday
Singapore CPI, Tuesday
Taiwan Industrial Production, Tuesday
India’s budget for the fiscal year ending March 2025, Tuesday
Turkey interest rate decision on Tuesday
Eurozone consumer confidence on Tuesday
Alphabet, Tesla, LVMH earnings Tuesday
Malaysia CPI, Wednesday
South African Consumer Price Index, Wednesday
Eurozone HCOB PMI, Wednesday
UK S&P Global PMI, Wednesday
Canada interest rate decision Wednesday
IBM, Deutsche Bank Earnings Wednesday
ECB Vice President Luis de Guindos to speak on Wednesday
Hong Kong Trade, Thursday
South Korea GDP on Thursday
US GDP, initial jobless claims, durable goods, merchandise trade, Thursday
G20 finance ministers and central bank governors meet in Rio de Janeiro from Thursday to Friday
Bitcoin 2024 Conference to be held in Nashville from Thursday through July 27
Japan Tokyo Consumer Price Index, Friday
U.S. Personal Income, PCE Price Index, University of Michigan Consumer Confidence, Friday
Mexico Trade, Friday
Some of the key market developments:
stock
S&P 500 futures were up 0.2% as of 10:39 a.m. Tokyo time.
Nikkei 225 futures (OSE) fell 1.2%
Japan’s TOPIX falls 0.8%
Australia’s S&P/ASX 200 fell 0.7%
Hong Kong’s Hang Seng rose 0.1%
The Shanghai Composite Index fell 0.4%
Euro Stoxx 50 futures up 0.4%
currency
The Bloomberg Dollar Spot Index fell 0.1%.
The euro rose 0.1% to $1.0893.
The Japanese yen was almost unchanged at 157.45 yen to the dollar.
The offshore yuan was little changed at 7.2890 to the dollar.
Cryptocurrency
Bitcoin little changed at $67,797.63
Ether rose 0.9% to $3,529.65.
Bonds
merchandise
West Texas Intermediate crude rose 0.4% to $80.49 a barrel.
Spot gold rose 0.3% to $2,409.12 an ounce.
This story was produced with assistance from Bloomberg Automation.
–With assistance from Joanna Ossinger, Richard Henderson, Matthew Burgess, Ruth Carson, and Winnie Zhu.
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