US stock futures and the dollar rose in early Asian trading on Friday as the 2024 presidential candidates, Joe Biden and his predecessor Donald Trump, engaged in their first debate. Trump was perceived as having a stronger performance than Biden.
Although the election is still four months away, investors anticipate that a Trump presidency would result in lower corporate taxes, stricter trade relations, and consequently higher stock prices and bond yields.
“Wall Street indices have edged higher over the past hour, which might indicate that Trump made a better case, as he is known to be Wall Street-friendly,” said Matt Simpson, senior market analyst at City Index in Brisbane.
The US dollar reached a 10-day high against the Mexican peso and rose against other trade-sensitive currencies, including the Canadian dollar.
Stock futures continued to gain as the debate went on, with the S&P 500 E-minis rising 0.3% and Nasdaq 100 E-minis increasing by 0.46%.
China’s benchmark CSI300 increased by 0.4%, while Hong Kong’s Hang Seng Index remained flat as the two US presidential candidates debated tariffs on China, with Trump criticizing Biden for not doing more.
During the debate, Biden appeared hoarse and hesitant at times, stumbling over his words on several occasions. Trump launched multiple attacks, including criticisms of Biden’s economic management, though many of his statements were deemed misleading or false by fact-checkers.
Biden acknowledged that inflation had significantly raised prices since the start of his term but claimed credit for restoring stability after the coronavirus pandemic.
Trump asserted that he had overseen “the greatest economy in the history of our country” before the pandemic and said he acted to prevent a deeper economic decline.
Karl Schamotta, chief market strategist at payments company Corpay in Toronto, said Biden’s “disastrous performance” had sharply increased the odds of a Trump victory.
“This is leading to a drop in trade-sensitive currencies,” he said.
Both Biden and Trump have supported a tough trade stance, particularly by imposing and threatening tariffs on China. However, investors are cautious about the inflationary impact of tariffs.
Online prediction market PredictIt’s 2024 presidential election market showed Biden’s odds dropping to 39% from 45% a day earlier, while Trump’s odds rose to 61% from 55%.
US Treasury yields increased slightly, with 10-year note yields up 2 basis points to 4.313% and 5 basis points higher for the week but still down 20 basis points for June overall.
Analysts at JPMorgan noted that Trump’s team had proposed extensive tariffs on imports, which would raise prices, while immigration restrictions would put upward pressure on wages, and extended tax cuts would likely increase government debt.
“Investors are hedging against a more isolationist turn in the United States after the November election,” Schamotta said.
Some investors cautioned against overinterpreting the stock market futures’ movements.
“We are still early in the process with much to unfold. Don’t assume a final outcome,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder.
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