Euro Gains on French Vote, China Eyed After PMI: Markets Wrap

(Bloomberg) — The euro strengthened on signs Marine Le Pen’s far-right party is unable to control outright following the primary round of France’s legislative elections. Asian stocks might be in focus amid further signs China’s economy is struggling.

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Initial election results showed Le Pen’s National Rally won with a smaller margin than some polls had indicated with opponents already strategizing learn how to keep the far-right party out of power. The euro rose in Asian trading after the outcomes lifted concerns that a really strong showing for Le Pen’s party would have increased the chances of expansive fiscal policy, further muddying the outlook for the common currency.

“A scenario where NR could rule by itself now looks less likely,” which lifted the euro as concerns on fiscal largess eased, said Rodrigo Catril, a strategist at National Australia Bank in Sydney. “We now must wait and see how the second round shapes up and if other parties can cobble together a united opposition to RN.”

Japanese stocks rallied on the open, while futures contracts in Hong Kong slipped. Investors can have a keen eye on Chinese stocks Monday after factory activity contracted for a second straight month in June. The private Caixin China manufacturing PMI release can also be scheduled later Monday.

The moves got here as concerns lingered on whether Asia’s stock rally can persist. While the MSCI Asia Pacific index rose 2.1% last quarter, its third straight quarterly gain, a souring Chinese economy saw the nation’s stocks enter a technical correction last week, while investors are concerned that the pace of Japan’s stock market rally may slow within the second half of the 12 months.

Elsewhere in Asia, South Korean currency traders might be on tenterhooks amid fears of a lift in volatility because the won’s recent trading hours come into effect. Confidence amongst Japan’s large manufacturers rose, data on Monday showed, leaving the door open for the Bank of Japan to contemplate an rate of interest hike later this month. Yield for the nation’s 10-year benchmark bond rose three basis points.

One in three economists surveyed by Bloomberg expects a rate hike at the subsequent gathering. The yen dropped to the bottom level since 1986 last week, prompting some analysts to flag a heightened risk of a rate move as Governor Kazuo Ueda has pledged to observe the yen’s impact on inflation closely.

Economy Cooling

Because the quarter led to the US on Friday, a swath of information indicated the world’s biggest economy is cooling without lasting damage to consumers. US consumer sentiment declined by lower than initially estimated on expectations inflationary pressures will moderate and the Fed’s preferred inflation gauge marked its smallest advance in six months. Treasuries edged lower Monday.

Traders will shift attention to European assets later Monday amid movements by Le Pen’s opposition to form alliances to dam her right-wing party from gaining power on the second round of voting. Of interest might be bond markets after the additional yield investors demand to carry 10-year French notes over safer German debt rocketed to greater than 80 basis points prior to the vote, levels last seen in the course of the euro area’s sovereign debt crisis.

“In the event that they begin to look credible, then we could see French markets get better,” said Kathleen Brooks, research director at XTB Ltd. “If fears a few hard right government begin to recede, we should always see it within the French–German yield spread first.”

In corporate news, Boeing Co.’s shares might be front of mind when US markets open after it agreed on Sunday to buy Spirit AeroSystems Holdings Inc. in an all-stock deal that values the corporate at $4.7 billion, in accordance with individuals with knowledge of the transaction. Still, the US Justice Department will charge the corporate with criminal fraud, leaving the planemaker to make a choice from pleading guilty or taking the chance of going to trial.

In commodities, oil was little modified as traders gauged China’s economic outlook and geopolitical risks in Europe and the Middle East. Gold edged lower after it wavered on Friday as traders digested the US inflation data.

Key events this week:

  • Australia retail sales, Monday

  • Japan Tankan report, Monday

  • China Caixin manufacturing PMI, Monday

  • Eurozone S&P Global Eurozone Manufacturing PMI, Monday

  • Indonesia CPI, Monday

  • India HSBC Manufacturing PMI, Monday

  • UK S&P Global / CIPS UK Manufacturing PMI, Monday

  • US construction spending, ISM Manufacturing, Monday

  • ECB President Christine Lagarde speaks, Monday

  • Bundesbank President Joachim Nagel speaks, Monday

  • RBA issues minutes of June policy meeting, Tuesday

  • South Korea CPI, Tuesday

  • Eurozone CPI, unemployment, Tuesday

  • Fed Chair Jerome Powell speaks, Tuesday

  • ECB President Christine Lagarde speaks, Tuesday

  • China Caixin services PMI, Wednesday

  • Eurozone S&P Global Eurozone Services PMI, PPI, Wednesday

  • Poland rate decision, Wednesdsay

  • US FOMC minutes, ISM Services, factory orders, trade, initial jobless claims, durable goods, Wednesday

  • ECB President Christine Lagarde speaks, Wednesday

  • Recent York Fed President John Williams speaks, Wednesday

  • Sweden’s Riksbank issues minutes of June meeting, Wednesday

  • Australia trade, Thursday

  • Brazil trade, Thursday

  • UK general election, Thursday

  • European Union provisional tariffs on China EVs set to be introduced, Thursday

  • ECB publishes account of June’s policy meeting, Thursday

  • US Independence Day holiday, Thursday

  • Philippines CPI, Friday

  • Taiwan CPI, Friday

  • Thailand CPI, international reserves, Friday

  • Eurozone retail sales, Friday

  • France trade, industrial production, Friday

  • Germany industrial production, Friday

  • ECB President Christine Lagarde speaks, Friday

  • Canada unemployment, Friday

  • US unemployment, nonfarm payrolls, Friday

  • Recent York Fed President John Williams speaks, Frida

A few of the predominant moves in markets:

Stocks

  • S&P 500 futures rose 0.2% as of 9:15 a.m. Tokyo time

  • Hang Seng futures fell 0.4%

  • Japan’s Topix rose 0.9%

  • Australia’s S&P/ASX 200 fell 0.7%

  • Euro Stoxx 50 futures fell 0.2%

Currencies

  • The Bloomberg Dollar Spot Index was little modified

  • The euro rose 0.2% to $1.0739

  • The Japanese yen was little modified at 160.94 per dollar

  • The offshore yuan was little modified at 7.2997 per dollar

  • The Australian dollar was little modified at $0.6673

Cryptocurrencies

  • Bitcoin rose 1% to $62,542.6

  • Ether rose 0.4% to $3,430.15

Bonds

  • The yield on 10-year Treasuries advanced two basis points to 4.41%

  • Japan’s 10-year yield advanced three basis points to 1.080%

  • Australia’s 10-year yield advanced 11 basis points to 4.42%

Commodities

  • West Texas Intermediate crude rose 0.3% to $81.75 a barrel

  • Spot gold fell 0.2% to $2,323 an oz

This story was produced with the help of Bloomberg Automation.

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