Asian markets fall after Biden withdraws from presidential race

Asian markets fell on Monday as Joe Biden’s decision to withdraw from the US presidential race fuelled fresh uncertainty, while traders appeared unmoved by China’s decision to cut interest rates in an attempt to boost its faltering economy.

After last weekend’s assassination attempt on Donald Trump – and the subsequent Republican convention – bolstered bets on his victory in November’s election, investors were trying to understand the ramifications of the latest news coming out of the White House.

Tokyo, Shanghai, Sydney, Seoul, Singapore, Taipei, Mumbai, Wellington and Manila all fell, although Hong Kong rebounded on healthy gains from Chinese tech companies.

London, Frankfurt and Paris all gained at the opening.

Stephen Innes said in his commentary on Dark Side Of The Boom: “It’s as if the political chess game has flipped its board and investors are left to pick up the pieces.

“This unexpected turnaround has injected a large dose of political uncertainty into the market, leaving everyone scrambling to determine their next move.”

Developments from Washington have overshadowed optimism that the Federal Reserve would cut interest rates as early as September, or perhaps again before January.

Biden on Sunday bowed to weeks-long calls for him to step down following a poor debate performance that amplified questions about his health, and endorsed Vice President Kamala Harris to succeed him.

The news left traders wondering who will face Trump, whose expected victory had boosted stocks and the dollar on expectations of tax cuts and deregulation.

Analysts said markets were likely to be volatile in the short term.

“While market instinct tells us that this news adds a degree of uncertainty to the outcome of the November 5 election that was not present last week, it will be several weeks… before anyone can reasonably determine whether the White House race is meaningfully tighter than previously appeared,” said Ray Attrill of National Australia Bank.

“In short, there will be more noise than signals on US policy for markets to deal with for at least the next few weeks.”

Stocks in Asia fell Monday after losses on Wall Street and in Europe, where trading was dominated by a global computer systems outage – the result of a faulty antivirus program update – that affected airports, airlines, trains, banks, shops and even medical appointments.

There was little reaction to China’s central bank’s announcement that it would cut borrowing costs as policymakers seek to revive the world’s second-largest economy, hit by a huge housing crisis and weak consumer demand.

The Bank of China has lowered prime rates on one-year and five-year loans in a bid to encourage commercial banks to extend more credit.

The move comes after a closely watched meeting of leaders last week that ended with few major announcements except promises to tackle “risks” in the economy.

However, authorities pledged on Friday to help ease debt pressure on local governments through reforms to the tax system.

Concerns about local government finances have been growing for years and have been compounded by a chronic housing debt crisis. In April, ratings agency Fitch downgraded its outlook on China’s sovereign credit.

– Key figures around 07:15 GMT –

Tokyo – Nikkei 225: DOWN 1.2% to 39,599.00 (closing)

Hong Kong – Hang Seng Index: up 1.3% at 17,639.71

Shanghai – Composite: DOWN 0.6% to 2,964.22 (closing)

London – FTSE 100: +0.6% to 8,200.51

Euro/dollar: DOWN to $1.0881 from $1.0885 on Friday

Pound/dollar: up to $1.2917 from $1.2914

Dollar/yen: up to 156.50 yen from 157.47 yen

Euro/pound: up to 84.23 pence from 84.27 pence

West Texas Intermediate: up 0.5% to $80.49 per barrel

North Sea Brent: up 0.4% at $82.97 per barrel

New York – Dow Jones: DOWN 0.9% to 40,287.53 (closing)

AFP