Asian shares outside Japan edged lower on Tuesday. Investors are contemplating the impact of a potential Trump victory on China, while the yen resumed its slide, leading to fresh warnings from officials following last week’s suspected intervention.

European and US Market Futures

Europe is set to open lower, with EUROSTOXX 50 futures down 0.3%. However, S&P 500 futures gained 0.2% and Nasdaq futures firmed 0.3% after dovish comments from the Federal Reserve fuelled expectations of more U.S. rate cuts this year, boosting Wall Street.

Asian Market Performance

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.3%, extending Monday’s 0.3% decline. Japan returned from a public holiday, and the Nikkei index rose 0.3%.

Impact of Attempted Assassination and Election Polls

Overnight, investors continued to process the fallout from the attempted assassination of former U.S. President Donald Trump on Saturday. On Monday, Trump nominated J.D. Vance as his vice-presidential running mate. Opinion polls indicate a close race between Trump and President Joe Biden, though Trump leads in several swing states likely to decide the election.

Market Reactions and Economic Data

The Dow Jones hit a record closing high, driven by energy and banking shares. Bitcoin surged, gold approached a record high, and the yield curve steepened as investors favoured trades seen as benefiting from a Trump victory.

The Shanghai Composite index fell 0.1%, while Hong Kong’s Hang Seng index dropped 1.4%, following a 1.5% decline the previous day. Weak economic data from China heightened concerns that Beijing might miss its 5% growth target this year without significant stimulus measures. Conversely, both Taiwanese and South Korean shares edged up 0.2%.

Federal Reserve and Currency Movements

Federal Reserve Chair Jerome Powell stated on Monday that three U.S. inflation readings in the second quarter “add somewhat to confidence” that inflation is sustainably returning to the Fed’s target. Markets have fully priced in a quarter-point rate cut from the Fed in September, with a total easing of 68 basis points expected by the year’s end. This kept a lid on the U.S. dollar overnight, although it was 0.1% firmer on Tuesday against a basket of major currencies, due to renewed yen weakness.

Yen Weakness and Japanese Government Response

The yen lost 0.4% to 158.67 per dollar, struggling to maintain gains after Tokyo’s suspected intervention last week disrupted the popular carry trade. Japanese officials issued fresh warnings that the government stands ready to counter excessively volatile currency moves.

Analyst Insights and Commodity Prices

Tony Sycamore, an analyst at IG, remarked, “I actually have bought dollars here. I think the U.S. dollar has probably bottomed for now.” He also noted the negative implications for Chinese stocks if the Trump administration increases tariffs on China, combined with a higher U.S. dollar and yields.

Long-term Treasuries found their footing in Asia, with the 10-year yield at 4.2060%, down 2 basis points. Gold rose 0.3% to $2,428.67 an ounce, nearing a record high. Oil prices ticked down on worries about slowing Chinese demand, with Brent futures falling 0.3% to $84.63 a barrel, and U.S. West Texas Intermediate crude slipping 0.3% to $81.64.

With Inputs from Reuters