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The stories that matter on money and politics in the race for the White House

The dollar and Treasury yields edged lower on Monday following Joe Biden’s decision to drop out of the US presidential race, as investors reassessed the “Trump trade” positions they have built in recent weeks.

As markets opened to news that Biden would not be seeking re-election, the dollar traded 0.1 per cent lower against a basket of rival currencies. US Treasuries gained, pulling the 10-year yield 0.01 percentage points lower to 4.23 per cent, reflecting what traders said were new unknowns in the run-up to the November presidential vote.

“In the next couple of weeks, I think there’s going to be more noise than signal for markets in what comes out on the political side,” said Ray Attrill, global co-head of foreign exchange strategy at National Australia Bank in Sydney. “Does that mean that economics will dominate? I don’t know. I think it all probably plays to a bit more indecision in the markets than has been the case in the last month or so.”

Growing confidence in a win for former president Donald Trump, which Rabobank’s Stefan Koopman said would likely lead to “deregulation, tax cuts and increased fiscal spending”, had in recent weeks boosted haven assets including gold and bitcoin as traders priced in a higher chance of crypto-friendly policies, rising geopolitical tensions and stronger US inflation.

Yet small moves early on Monday in the price of both assets — bitcoin advanced 0.4 per cent while gold rose 0.1 per cent to $2,402 per troy ounce — as well as in Treasury yields and the dollar, suggest that investors remained cautious about unwinding their recently built positions, said Koopman, whose “base case” remained a Trump win in November.

Prediction markets showed Trump’s victory odds declined slightly on Sunday as Biden officially endorsed vice-president Kamala Harris.

Long-dated Treasuries had been hit in recent weeks as investors priced in a growing chance of a second Trump presidency, betting his tax-cutting policies would be inflationary and bad for bonds. However, the impact had been muddied by increasing expectations of a Federal Reserve interest rate cut as US inflation fell.

In a note to clients, Stuart Kaiser, head of US equity trading strategy at Citigroup, said Biden’s decision to step aside would be a “headwind for Trump trades” and “add an uncertainty premium to the [Democratic National Convention] dates in August and shift odds back closer to our 50/50 base case” for the election outcome.

S&P 500 futures climbed 0.2 per cent ahead of the Wall Street open. European stocks rebounded from a string of losses last week, with the Stoxx Europe 600 0.6 per cent higher in early trade.

In Asia, the Nikkei 225 index fell 1.3 per cent. Traders said similar falls of 1.4 per cent in South Korea’s Kospi and 0.7 per cent in Australia’s S&P/ASX 200 were likely to be the effect of funds trimming positions built in recent weeks around expectations of a clear Trump victory. The yen traded in a tight range at about ¥157.5 to the dollar.

In Japan, defence industry stocks such as Mitsubishi Heavy, IHI and Japan Steel Works have recently soared to multiyear highs on a bet that a Trump victory and an era of US isolationism would force allies such as Tokyo to spend more on military equipment. Those same stocks dropped sharply on Monday, with shipbuilder IHI leading declines with a 3.7 per cent fall.

Trump’s frequent calls for tariffs to protect US manufacturers have prompted some investor concerns about companies likely to be affected but also provided a tailwind for Asian groups with strong manufacturing bases in the US.

“The bigger picture is that investors probably still see Trump with an advantage, so in market terms, this isn’t a huge change in the narrative. Asian markets are certainly going to be taking a lot of their direction on this from the ‘mother market’ in the US,” said Takeo Kamai, head of execution services at CLSA Securities in Tokyo.

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Woodside Energy has agreed to buy struggling US liquefied natural gas developer Tellurian in a $1.2bn deal that the Australian company said would turn it into a “global LNG powerhouse”.

The transaction, announced by the companies on Sunday, draws a line under a long-running saga surrounding Tellurian, which ousted its chair in December amid repeated struggles to get its $25bn Driftwood export project in Louisiana off the ground.

“Despite our recent progress, we’ve been clear that the company’s situation necessitated an exploration of all possible alternatives, including a potential sale,” wrote Tellurian executive chair Martin Houston in a letter to shareholders. “Ultimately, we decided the attractive offer in hand outweighed the risks and uncertainty associated with going it alone.”

Tellurian was founded in 2016 by Houston, a former BG Group executive, and US LNG pioneer Charif Souki, with the aim of developing the Driftwood project on a 1,200-acre site along the Calcasieu river. If completed, it would be one of the country’s largest export terminals.

But the project has faced repeated setbacks, losing key buyers and struggling to raise funds despite a surge in demand for US gas since Russia’s invasion of Ukraine.

Souki, credited with kick-starting the US LNG export industry at his former company Cheniere, was ousted as executive chair at Tellurian in December as its struggles intensified.

The company’s travails have caused its market value to collapse from a high of almost $3bn in 2017 to less than $500mn on Friday. The sale price, which includes $900mn in cash plus the company’s debt, is a 75 per cent premium to its most recent close.

For Woodside, Australia’s biggest oil and gas developer, the deal gives it a better foothold in the booming US LNG export industry at a time when demand for the super-chilled fuel is set to grow rapidly.

“The acquisition of Tellurian and its Driftwood LNG development opportunity positions Woodside to be a global LNG powerhouse,” said Woodside chief executive Meg O’Neill.

Woodside, which traces its roots to the 1950s and doubled in size in 2022 when it merged with BHP’s oil and gas division, has been on the hunt for acquisitions to bolster its growth prospects.

It held talks with local rival Santos this year for a $52bn deal that would have created a “national champion”, but it fell apart after the two companies failed to agree terms.

Saul Kavonic, an analyst with MST Marquee, said Woodside had acquired Tellurian at a “bargain price” close to book value and would be better set to develop the project than the existing management due to its existing relationships in the LNG sector.

He added Woodside would look to sell stakes in the project to partners in time, with Japanese, Middle Eastern and US investors potentially interested once Woodside takes control of the assets.

“This is the right kind of M&A Woodside should be pursuing,” he said, adding that Woodside would still need to detail the impact of developing Driftwood on its dividend policy to investors.

The Perth-based company already has a burgeoning presence in the US market, where it is the majority owner of the Shenzi field, off the coast of Louisiana.

The Tellurian takeover is the latest example of consolidation in the global energy sector as large groups such as Chevron and ExxonMobil have taken out smaller rivals to boost their growth prospects.