Market Analysis

Global shares stabilized on Monday following President Joe Biden's announcement over the weekend that he would withdraw from the election race. This news brought a measure of optimism to the markets, although a surprise rate cut by China's central bank did not provide much of a boost to Asian markets.

On Sunday, Biden declared his exit from the presidential race and endorsed Vice President Kamala Harris as the Democratic candidate. Online betting platform PredictIT reflected this shift, with Donald Trump’s odds of victory decreasing by 4 cents to 60 cents, while Harris’ chances increased by 12 cents to 39 cents.

Market reactions were relatively muted. S&P 500 futures edged up by 0.1%, and Nasdaq futures rose by 0.2%. The MSCI All-World index, which experienced a 2.1% drop last week, managed to show slight gains.

The dollar remained steady against a basket of currencies, while cryptocurrencies, which had previously benefited from heightened expectations of a Trump return, steadied after Biden's announcement. "There’s been a bit of unwinding of the 'Trump trade,' with less concern about his return and a generally more positive outlook," noted Fiona Cincotta, senior market analyst at City Index.

Bitcoin, which had surged to a six-week high last week, saw a modest increase of 0.5% to $67,230 on Monday. U.S. Treasuries also strengthened, with yields on the benchmark 10-year note declining by 2.2 basis points to 4.217%. This drop followed last week's rise in yields, driven by fears of increased government spending under a potential Trump administration.

Earnings in Focus

This week’s corporate earnings reports are set to be a key market driver, with Tesla (NASDAQ) and Google-parent Alphabet (NASDAQ) starting the earnings season for the "Magnificent Seven" group of major tech stocks. The tech sector is expected to see a 17% year-over-year earnings increase, with the communication services sector projected to rise by about 22%. These gains are expected to surpass the 11% anticipated rise for the S&P 500 overall.

Rupert Thompson, chief economist at IBOSS, emphasized the importance of these upcoming earnings reports: "The performance of the Magnificent Seven in the coming weeks will be crucial in determining whether the current market rotation has more momentum."

European banks are also reporting this week, with attention on whether the benefits from higher interest rates are diminishing and if recent political developments are impacting sentiment. The STOXX 600 index rose nearly 1%, rebounding after a 2.6% decline last week.

In Asia, the MSCI All-Country Asia-Pacific Index (excluding Japan) fell by an additional 0.7% after a 3% drop last week. The People's Bank of China’s decision to cut short-term interest rates by 10 basis points led to lower long-term borrowing costs and bond yields. However, the market response was lukewarm, reflecting concerns about the ongoing weakness in the Chinese economy. Chinese blue-chip stocks dropped 0.9%, and the yuan also weakened.

This week’s economic calendar includes significant data, such as the Federal Reserve's preferred inflation measure and preliminary U.S. GDP figures. Markets are anticipating a rate cut in September, which has supported risk appetite.

In commodity markets, gold edged up 0.1% to $2,402 per ounce, just below last week’s record high of $2,483.60. Oil prices also increased, with Brent crude rising by 0.4% to $82.91 per barrel and U.S. crude gaining 0.3% to $80.40 per barrel. The ongoing conflict in Gaza, with no signs of a ceasefire agreement, has kept oil prices supported.

Paraphrasing text from "Reuters" all rights reserved by the original author.