US President Biden’s decision to end his re-election campaign has caused market turmoil, heightened risk aversion, a fall in the US dollar, and an increase in the price of gold. On Monday, the Asia-Pacific stock markets generally saw a decline. Even the unexpected rate cut by the Chinese central bank did not have a boosting effect.
Biden stated that he would complete his term and support Vice President Harris to be the Democratic Party’s presidential nominee. Currently, several Democratic governors, state party chairs, and congress members have expressed their endorsement for Harris, but it’s still uncertain whether she will receive the official nomination at the Democratic National Convention next month.
The uncertainty surrounding the US election has increased, leading to a rise in risk aversion and a strong surge in spot gold prices, which briefly surpassed $2,410 per ounce in early Asian trading.
According to polls, Trump is currently leading the US presidential election. On July 13th, Trump was shot by an assassin during a rally in Pennsylvania, after which his support rate continuously increased.
Market expectations suggest that the Federal Reserve may shift towards a loose monetary policy, supporting gold prices this year, which hit a historic high last week.
Following Biden’s announcement to end his re-election bid, the Asia-Pacific stock markets also declined on Monday, with the Bloomberg US Dollar Spot Index dropping by 0.2%.
IG Markets analyst Hebe Chen stated, “Faced with a significant unexpected event for the second week in a row, Asian markets will face serious challenges.”
She added, “With investors digesting unfamiliar political developments, an accelerating wave of risk aversion may have a more severe impact on Asian stock markets than the previous week. The foreign exchange market may also experience greater pressure.”
In commodity markets, oil also rose in early trading on Monday.
On Tuesday, Tesla and Google’s parent company Alphabet will report their earnings. Analysts may inquire about Tesla’s progress with its robot plans, while investors will delve into the details of how Alphabet’s revenue is enhanced through artificial intelligence (AI).
Despite an unexpected rate cut by the Chinese central bank on Monday, it had little boosting effect on the stock market. The People’s Bank of China announced a reduction in the 7-day reverse repurchase operation rate from 1.8% to 1.7%, as well as a 10 basis point cut in this month’s one-year and five-year loan prime rate (LPR).
However, the market was not satisfied with this move, as the Shanghai and Shenzhen 300 Index fell by 0.8% in early trading.
Gary Ng, Senior Economist at a French bank in the Asia-Pacific region, mentioned, “Basically, all fundamental factors indicate that China needs a lower interest rate environment, especially in this tight monetary situation where real interest rates are indeed high.”
Ng added, “I believe the overall trend aligns well with the fact that this is not good for the economy.”
(This article referenced relevant reports from Reuters and Bloomberg)