Asian Markets Drop as Biden Drops Out of White House Race

AFP/APP

Hong Kong: Asian markets fell Monday as Joe Biden’s decision to drop out of the US presidential race fueled fresh uncertainty. 

Traders appeared unmoved by China’s decision to cut interest rates in a bid to boost the country’s stuttering economy.

Following last weekend’s assassination attempt on Donald Trump and the subsequent Republican convention, which boosted bets on his victory in November’s election, investors are trying to gauge the ramifications of the news from the White House. 

Biden, on Sunday, yielded to weeks of calls for him to step aside after a poor debate performance that raised questions about his health and endorsed Vice President Kamala Harris as his successor.

The news has left traders wondering who will challenge Trump, whose expected victory had previously lifted equities and the dollar due to anticipated tax cuts and deregulation. Analysts predict that markets will be volatile in the near term.

“While market instinct will be to say that the news adds a degree of uncertainty to the outcome of the 5 November election that wasn’t present last week, it will be many weeks before anyone can reasonably determine if the race for the White House is significantly narrower than looked to be the case previously,” said National Australia Bank’s Ray Attrill.

 “In short, there’ll be more noise than signal on US politics for markets to contend with in the coming few weeks at least.”

Stocks in Asia fell Monday following losses on Wall Street and Europe. Trade was dominated by a crash in global computer systems due to a faulty update to an antivirus program, affecting airports, airlines, trains, banks, shops, and even doctors’ appointments.

Tokyo, Hong Kong, Shanghai, Sydney, Seoul, Singapore, Taipei, and Manila all fell, while Jakarta and Wellington edged up. The latest developments from Washington overshadowed optimism that the Federal Reserve will cut interest rates as soon as September and possibly again before January.

There was little reaction to news that China’s central bank had cut borrowing costs to encourage commercial banks to grant more credit. The Bank of China lowered the one-year and five-year loan prime rates in an attempt to stimulate the world’s number two economy, which has been battered by a huge property crisis and weak consumer demand.

This decision follows a closely watched meeting last week where leaders made few major announcements apart from pledges to address “risks” in the economy. 

Officials pledged Friday to help ease debt pressure on local governments through tax system reforms. 

Concerns about local government finances have grown over the years, exacerbated by a chronic real estate debt crisis. In April, ratings agency Fitch lowered its outlook on China’s sovereign credit.