Analysts’ View: Impact of the U.S. protests on financial markets

TOKYO/SINGAPORE (Reuters) – National Guard troops have been deployed in 15 U.S. states and the U.S. capital after five nights of violence and destruction that began with peaceful protests over the death of a black man, George Floyd, in police custody.

Here is what analysts think the unrest means for markets:

DAIJU AOKI, REGIONAL CHIEF INVESTMENT OFFICER FOR JAPAN AT UBS SECURITIES, TOKYO:

“U.S. President Donald Trump’s approval ratings have dropped because of these internal protests. The markets are starting to see a heightened chance that Joe Biden wins the U.S. presidential election, but there is a lot of uncertainty around that and around whom Biden would choose for vice president.

“Even if Biden did win, the United States and China will continue to clash over issues like technology.

“It is becoming more difficult to see U.S. markets rallying further from here, but at the same time we don’t expect a big decline, so the S&P 500 could be rangebound.”

OSAMU TAKASHIMA, HEAD OF G10 FX STRATEGY AT CITIGROUP GLOBAL MARKETS JAPAN, TOKYO:

“In the mid-term, we are constructive on the dollar, but Treasury yields have broken lower, and this has put some downward pressure on the dollar.

“Also, there is a lot of uncertainty about the social environment in the United States. First, there is corona. Now there are mass demonstrations. These factors are a negative for the dollar.

“Normally, a safe-haven currency, such as the Japanese yen or the Swiss franc, has a current account surplus.

“The dollar doesn’t have that, but it is used widely across the world, which is its safe-haven status. I don’t think investors will question the dollar’s safe-haven status.”

CHRIS WESTON, HEAD OF RESEARCH, PEPPERSTONE, MELBOURNE:

“The impact is twofold, the first one is the economic hit…but there’s a political angle to this and I think the market is starting to wake up that a Biden victory could be modestly negative for risk assets – he’s considered to be much more hawkish on the taxation front.

“So there’s the cost of the protests but also the political angle, which I think is causing markets which are extremely frothy to just take a bit of risk off the table.”

SEAN CALLOW, FX ANALYST, WESTPAC, SYDNEY:

“Normally it’s not something we’d regard as (market moving)…these are not the first street protests in the U.S., but in the short term I guess a concern is the turbulence and division it’s going to cause and what that could mean as economies and states attempt to reopen and businesses look to recover…but it’s probably not something that’s going to last for very long.”

SHAFALI SACHDEV, HEAD OF FX ASIA, BNP PARIBAS WEALTH MANAGEMENT, SINGAPORE:

“The market is basically treating (the demonstrations) as an internal matter at the moment and we are not seeing an impact on currencies from that at this point.

“At this point the market is more focused on the press conference that came out on Friday. I think that’s been a big driver and continues to be this morning, because after a week of so much speculation about the U.S.-China trade deal, the lack of any serious surprises has been enough to drive a relief rally.”