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Treasuries gain as markets reassess ‘Trump trades’ after Biden withdraws

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Treasuries gain as markets reassess ‘Trump trades’ after Biden withdraws

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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.”

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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.

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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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Supreme Court blocks redrawing of New York congressional map, dealing a win for GOP

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Supreme Court blocks redrawing of New York congressional map, dealing a win for GOP

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The Supreme Court on Monday intervened in New York’s redistricting process, blocking a lower court decision that would likely have flipped a Republican congressional district into a Democratic district.    
  
At issue is the midterm redrawing of New York’s 11th congressional district, including Staten Island and a small part of Brooklyn. The district is currently held by a Republican, but on Jan. 21, a state Supreme Court judge ruled that the current district dilutes the power of Black and Latino voters in violation of the state constitution.  
  
GOP Rep. Nicole Malliotakis, who represents the district, and the Republican co-chair of the state Board of Elections promptly appealed to the U.S. Supreme Court, asking the justices to block the redrawing as an unconstitutional “racial gerrymander.” New York’s congressional election cycle was set to officially begin Feb. 24, the opening day for candidates to seek placement on the ballot.  
  
As in this year’s prior mid-decade redistricting fights — in Texas and California — the Trump administration backed the Republicans.   
 
Voters and the State of New York contended it’s too soon for the Supreme Court to wade into this dispute. New York’s highest state court has not issued a final judgment, so the voters asserted that if the Supreme Court grants relief now “future stay applicants will see little purpose in waiting for state court rulings before coming to this Court” and “be rewarded for such gamesmanship.” The state argues this is an issue for “New York courts, not federal courts” to resolve, and there is sufficient time for the dispute to be resolved on the merits. 
  
The court majority explained the decision to intervene in 101 words, which the three dissenting liberal justices  summarized as “Rules for thee, but not for me.” 
 
The unsigned majority order does not explain the Court’s rationale. It says only how long the stay will last, until the case moves through the New York State appeals courts. If, however, the losing party petitions and the court agrees to hear the challenge, the stay extends until the final opinion is announced. 
 
Dissenting from the decision were Justices Sonia Sotomayor, Elena Kagan, and Ketanji Brown Jackson. Writing for the three, Sotomayor  said that  if nonfinal decisions of a state trial court can be brought to highest court, “then every decision from any court is now fair game.” More immediately, she noted, “By granting these applications, the Court thrusts itself into the middle of every election-law dispute around the country, even as many States redraw their congressional maps ahead of the 2026 election.” 

Monday’s Supreme Court action deviates from the court’s hands-off pattern in these mid-term redistricting fights this year. In two previous cases — from Texas and California — the court refused to intervene, allowing newly drawn maps to stay in effect.  
  
Requests for Supreme Court intervention on redistricting issues has been a recurring theme this term, a trend that is likely to grow.  Earlier last month  the high court allowed California to use a voter-approved, Democratic-friendly map.  California’s redistricting came in response to a GOP-friendly redistricting plan in Texas that the Supreme Court also permitted to move forward. These redistricting efforts are expected to offset one another.     
   
But the high court itself has yet to rule on a challenge to Louisiana’s voting map, which was drawn by the state legislature after the decennial census in order to create a second majority-Black district.  Since the drawing of that second majority-black district, the state has backed away from that map, hoping to return to a plan that provides for only one majority-minority district.    
     
The Supreme Court’s consideration of the Louisiana case has stretched across two terms. The justices failed to resolve the case last term and chose to order a second round of arguments this term adding a new question: Does the state’s intentional creation of a second majority-minority district violate the constitution’s Fourteenth and Fifteenth Amendments’ guarantee of the right to vote and the authority of Congress to enforce that mandate?    
Following the addition of the new question, the state of Louisiana flipped positions to oppose the map it had just drawn and defended in court. Whether the Supreme Court follows suit remains to be seen. But the tone of the October argument suggested that the court’s conservative supermajority is likely to continue undercutting the 1965 Voting Rights Act.   

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Map: Earthquake Shakes Central California

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Map: Earthquake Shakes Central California

Note: Map shows the area with a shake intensity of 3 or greater, which U.S.G.S. defines as “weak,” though the earthquake may be felt outside the areas shown.  All times on the map are Pacific time. The New York Times

A minor earthquake with a preliminary magnitude of 3.5 struck in Central California on Monday, according to the United States Geological Survey.

The temblor happened at 7:17 a.m. Pacific time about 6 miles northwest of Pinnacles, Calif., data from the agency shows.

As seismologists review available data, they may revise the earthquake’s reported magnitude. Additional information collected about the earthquake may also prompt U.S.G.S. scientists to update the shake-severity map.

Source: United States Geological Survey | Notes: Shaking categories are based on the Modified Mercalli Intensity scale. When aftershock data is available, the corresponding maps and charts include earthquakes within 100 miles and seven days of the initial quake. All times above are Pacific time. Shake data is as of Monday, March 2 at 10:20 a.m. Eastern. Aftershocks data is as of Monday, March 2 at 11:18 a.m. Eastern.

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US says Kuwait accidentally shot down 3 American jets

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US says Kuwait accidentally shot down 3 American jets

The U.S. and Israel have been conducting strikes against targets in Iran since Saturday morning, with the aim of toppling Tehran’s clerical regime. Iran has fired back, with retaliatory assaults featuring missiles and drones targeting several Gulf countries and American bases in the Middle East.

“All six aircrew ejected safely, have been safely recovered, and are in stable condition. Kuwait has acknowledged this incident, and we are grateful for the efforts of the Kuwaiti defense forces and their support in this ongoing operation,” Central Command said.

“The cause of the incident is under investigation. Additional information will be released as it becomes available,” it added.

In a separate statement later Monday, Central Command said that American forces had been killed during combat since the strikes began.

“As of 7:30 am ET, March 2, four U.S. service members have been killed in action. The fourth service member, who was seriously wounded during Iran’s initial attacks, eventually succumbed to their injuries,” it said.

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Major combat operations continue and our response effort is ongoing. The identities of the fallen are being withheld until 24 hours after next of kin notification,” Central Command added.

This story has been updated.

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