By Tom Westbrook
SINGAPORE (Reuters) – Gold hit a record and bonds rose on Wednesday as markets braced for a drop in global interest rates, while stocks in Taiwan fell after U.S. presidential candidate Donald Trump appeared lukewarm on his commitment to defense of the island.
Sterling edged higher as British inflation held to 2% year-on-year in June against forecasts for 1.9%, with services inflation stuck at a dismal 5.7%.
FTSE futures rose 0.2% and S&P 500 futures traded 0.2% lower after the money index hit a record high on Wednesday.
MSCI’s broadest index of Asia-Pacific shares outside Japan was unchanged and Japan’s Nikkei fell 0.4%.
In Taiwan, chipmaker TSMC fell 3%, wiping nearly $30 billion off its market value, after Trump questioned US support in an interview with Bloomberg Businessweek, saying Taiwan should pay for US protection.
It was unclear exactly what Trump was planning, but his selection of trade hawk JD Vance as his running mate has signaled to markets that China will play a big part in his foreign policy thinking.
Chinese stocks fell for the second day in a row.
The Taiwan dollar fell slightly to a two-week low. China’s yuan was steady at 7.2673 per dollar as markets awaited news from a meeting of leaders in Beijing, which ends on Thursday.
“It’s increasingly clear to me that Trump has to be strong on the USD for at least a while,” said Brent Donnelly, president at analyst firm Spectra Markets, as he is expected to impose tariffs and run a larger budget deficit. up.
“It’s hard to imagine USDCNH ending 2024 below 7.25 with a Trump victory in November, but not hard to imagine it closing above 7.50,” he said, referring to the dollar-yuan pair.
Elsewhere in the technology sector ASML, the largest supplier of equipment to chipmakers, reported better-than-expected second-quarter earnings and shares opened higher.
GOLD Shines
In Asia, New Zealand shares hit their highest since March 2022 as data showed inflation slowing, although the rates market eased and the currency rallied on rising domestically fueled inflation.[.AX][NZD/]
Treasuries held on to gains that had pushed 10-year U.S. yields to four-month lows overnight as Federal Reserve Chairman Jerome Powell said the recent cooling in inflation readings “added some confidence” that consumer prices are being brought under control.
Fed funds futures have fully priced in a US rate cut for September, followed by two more before the end of January 2025.
Ten-year yields were steady at 4.167% and two-year yields stood at 4.44%. Bond markets in Australia, Japan and South Korea rose. [JP/][.KS]
Lower yields helped gold rise sharply and through chart resistance around $2,450 an ounce, despite a broadly strong dollar. It hit a record high of $2,482 in Asian trade on Wednesday. [GOL/]
“Gold’s ability to find support in any condition this year is worth noting,” Commonwealth Bank of Australia commodities strategist Vivek Dhar said.
“While we think gold prices face uncertainty in the coming months, we think uncertainty has a positive slant, increasing the risk that gold will rise above our $2,500/oz forecast by the end of the year.”
The Japanese yen was steady at 157.9, off a 38-year low of 161.96 touched earlier in July, after several rounds of suspected intervention from Japan late last week.
The euro was steady at $1.0905.
Oil prices fell slightly, weighed down by signs of weakening demand from China.
Brent crude futures were down nine cents at $83.64 a barrel and U.S. crude futures were seven cents lower at $80.69 a barrel. [O/R]
(Editing by Sam Holmes and Kim Coghill)