Asian Markets Drop As Biden Bows Out Of White House Race

Asian markets took a hit on Monday following Joe Biden’s announcement to withdraw from the US presidential race, causing fresh uncertainty. This development, coupled with China’s recent interest rate cuts aimed at reviving its sluggish economy, left traders unsettled.

The recent attempt on Donald Trump’s life and the subsequent Republican convention bolstered the belief that Trump could win the upcoming election, further complicating the market’s reaction to Biden’s exit. With Biden stepping down due to health concerns after a disappointing debate, and endorsing Kamala Harris as his successor, investors are now left to ponder the implications for the November election.

Markets are now grappling with the question of who will face Trump, whose anticipated win had previously buoyed equities and the dollar due to expectations of tax cuts and deregulation. Analysts predict a turbulent period ahead for the markets.

“While the news adds uncertainty to the election outcome, it will be weeks before we can determine if the race is truly tighter than previously thought,” said Ray Attrill of National Australia Bank. “In the meantime, markets will face more noise than clarity regarding US politics.”

Asian stocks reflected the uncertainty, with significant losses in Tokyo, Shanghai, Sydney, Seoul, Singapore, Taipei, Mumbai, Wellington, and Manila, although Hong Kong saw gains in Chinese tech stocks. In contrast, European markets opened on a positive note with rises in London, Frankfurt, and Paris.

Stephen Innes commented, “The political landscape has dramatically shifted, leaving investors to reassess their strategies amid this new wave of uncertainty.”

This political turmoil overshadowed the optimism surrounding potential Federal Reserve interest rate cuts, expected as early as September. Meanwhile, China’s central bank’s decision to lower borrowing costs to stimulate the economy received a muted response. The reduction in loan prime rates is part of an effort to encourage more credit amid a severe property crisis and weak consumer demand.

Last week’s meeting of Chinese leaders resulted in pledges to address economic “risks” but offered few significant measures. Officials also committed to easing local government debt pressures through tax system reforms, responding to growing concerns about local government finances exacerbated by the ongoing real estate debt crisis. In April, Fitch downgraded its outlook on China’s sovereign credit due to these persistent financial issues.