US President Joe Biden.
Credit: Reuters File Photo
Seoul, South Korea: Investors around the world are trying to gauge how President Joe Biden's decision to drop out of the presidential race will affect stocks, bonds, the dollar and other markets.
As Biden slipped in the polls after his debate performance, so-called "Trump trades" gained prominence as investors prepared for a Republican win. A new Democratic ticket could alter investors' perceived election odds, with many expecting increased volatility as traders reconsider their strategies.
In after-hours trading late Sunday night, futures for the S&P 500 index rose slightly. Trading can be thin before the official market open, but the move, while small, is notable coming after one of the worst weeks for the U.S. stock market this year.
Treasury bond yields and the dollar were little changed. The dollar has slipped recently, in part because of comments former President Donald Trump has made criticizing a stronger dollar, which makes it harder for U.S. manufacturers to sell abroad. (A view shared by his running mate, Sen. JD Vance.)
The price of gold rose. Gold, which often serves as a haven for investors during bouts of market volatility and dollar weakness, hit a record last week.
Bitcoin, which has rallied on polls showing a lead for Trump, who has courted crypto companies with promises to end a regulatory crackdown, jumped more than 1% after Biden's announcement.
Markets in Asia were mostly down early Monday. Along with the political upheaval in the United States, investors were digesting an economic policy announcement from China's leaders. Stocks in Shanghai and Shenzhen slipped in early trading Monday.
Taiwan's main stock index dropped sharply Monday. Taiwan, which plays a central role in the global semiconductor supply chain, has been accused by Trump of taking "about 100 per cent of our chip business." TSMC, the world's biggest maker of advanced computer chips, accounts for a large share of Taiwan's market.
Japan's Nikkei 225 fell slightly Monday. Market analysts in Japan have said that the shared affinity between Trump and Vance for a weak dollar would weigh on Japanese stocks. The yen, which recently slid to a nearly four-decade low against the dollar, has boosted the competitiveness of Japanese products like cars and manufacturing equipment sold overseas.
"Mr. Trump's economic policies are expected to ultimately lead to a weaker dollar and lower global stock prices," Takahide Kiuchi, executive economist at Nomura Research Institute, wrote in a note Monday. As traders parse the complicated web of policies that Trump has said he would implement, and now rethink his odds of victory as the Democrats revamp their ticket, "there might not be a clear direction in the short term," Kiuchi wrote.