Gold hits record while comments by Donald Trump hit Taiwan stocks

Singapore — Gold hit a record and bonds rallied on Wednesday as markets prepared for global interest rates to fall, while stocks in Taiwan slipped after US presidential candidate Donald Trump sounded lukewarm in his commitment to the island’s defence.

Sterling ticked higher after British inflation held at 2% year on year in June against forecasts for 1.9%, with services inflation stuck at an uncomfortable 5.7%.

FTSE futures rose 0.2% and S&P 500 futures traded 0.2% lower after the cash index made a record high on Wednesday.

MSCI’s broadest index of Asia-Pacific shares outside Japan was flat and Japan’s Nikkei fell 0.4%.

In Taiwan, chipmaker TSMC fell 3%, wiping out close to $30bn in 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; however, his selection of trade hawk JD Vance as his running mate had already put markets on notice that China would figure heavily in his foreign policy thinking.

Chinese stocks were subdued for a second day running.

The Taiwanese dollar slipped slightly to a two-week low. China’s yuan steadied at 7.2673 per dollar as markets waited on news from a leadership meeting in Beijing which ends on Thursday.

“It is more and more clear to me that Trump should be bullish for the dollar for at least a while,” said Brent Donnelly, president at analytics firm Spectra Markets, as he is expected to impose tariffs and run a higher budget deficit.

“It’s hard to imagine the dollar-CNH ending 2024 below 7.25 on a Trump victory in November but it’s 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 equipment supplier to chipmakers, reported better-than-expected second-quarter earnings and shares were indicated as opening higher.

Gold glitters

In Asia, New Zealand shares hit their highest since March 2022 after data showed inflation slowing, though the rates market dipped and the currency rose on sticky domestically driven inflation.

Treasuries held gains that had pushed 10-year US yields to four-month lows overnight after Federal Reserve chair Jerome Powell said recent cooling in inflation readings “add somewhat to confidence” that consumer prices are coming under control.

Fed funds futures have fully priced 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 hovered at 4.44%. Bond markets in Australia, Japan and South Korea rallied.

Lower yields helped propel gold sharply higher and through chart resistance around $2,450/oz despite a broadly firm dollar. It touched a record $2,482/oz in Asia trade on Wednesday.

“Gold’s ability to find support in any condition this year is worth highlighting,” said Commonwealth Bank of Australia commodity strategist Vivek Dhar.

“While we think gold prices face uncertainty in coming months, we think the uncertainty has a positive skew, raising the risk that gold rises above our forecast of $2,500/oz by the end of the year.”

The Japanese yen was steady at ¥157.9/$, well off a 38-year low of ¥161.96/$ touched earlier in July after a few rounds of suspected intervention from Japan late last week.

The euro was steady at $1.0905.

Oil prices slipped slightly, weighed by signs of weakening demand from China.

Brent crude futures fell nine cents to $83.64 a barrel and US crude futures were seven cents lower at $80.69 a barrel.

Reuters