Asian stocks weigh Wall Street losses, U.S. election uncertainty

October 24, 2024 (MLN): Asian markets were mixed on Thursday following steep losses on Wall Street, as a spike in US Treasury yields led investors to scale back their expectations for interest rate cuts, as APP reported. 

With the US presidential election still seen as a coin toss less than two weeks away, there was plenty of uncertainty on trading floors. Observers noted that dealers were eyeing a potential win for Donald Trump and policies that could stoke inflation again.

This, along with a strong run of economic data and remarks from Federal Reserve officials backing a cautious approach to easing monetary policy, has led to diminished expectations for rate cuts.

Traders had previously been confident that the central bank would follow up last month's bumper 50-basis-point cut with another at its November meeting and a smaller one in December.

However, these expectations have waned as Treasury yields have pushed higher to 4.24%, compared to 3.73% in September.

Observers expressed concern that a win for Trump over Democratic rival Kamala Harris could result in tax cuts, ramped-up trade tariffs, and increased deregulation.

This has fueled the so-called "Trump trade," in which investors jockey for positions to prepare for such an eventuality.

Sentiment has been "weighed down by the move up in yields and pushback on Fed rate cut expectations," said Rodrigo Catril of National Australia Bank. He added, "Solid economic momentum, as well as Fed messaging emphasizing a gradual and deliberate approach to further policy easing, is making the market nervous. Once you add the upcoming US election alongside its associated uncertainty (higher or lower taxes? more or less regulation? new trade war?), taking some chips off the table makes sense."

All three main indexes on Wall Street finished well down, with the Nasdaq losing more than 1%.

The drop in rate cut expectations has pushed the dollar up against its peers, bringing it to a near three-month high against the yen and a two-and-a-half-month high against sterling.

Gold extended Wednesday's drop from a record high as bonds offer better returns than the precious metal, which does not provide interest.

Oil prices rose more than 1%, clawing back the previous day's drop as dealers try to assess the demand outlook and the crisis in the Middle East amid fears about Israel's plans to retaliate against Iran for this month's missile attack.

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