(Bloomberg) — The euro fell amid concerns about France’s finances after the election, while Asian stocks eked out gains, helped by a rise in Taiwan’s index.
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The common currency fell as much as 0.4% but then recovered some of the losses as no French political party is in a position to secure the majority needed to govern after the second round. While that increases the risk of political instability in a country that has no tradition of coalitions, it also potentially limits the influence of the left-wing New Popular Front coalition and Marine Le Pen’s National Rally, which had proposed increases in public spending.
French government bond futures underperformed their German peers.
“We view the outcome as broadly market-friendly, with risks related to the National Rally receding for now and the left/far-left NFP set to fall well short of a majority with essentially no prospects of being able to implement its agreed alliance agenda,” Evercore ISI strategist Krishna Guha wrote in a note to clients.
Asian stocks edged higher, led by the technology sector. Taiwan Semiconductor Manufacturing Co. rose as much as 2% to a record high after Morgan Stanley raised its price target. Still, about three stocks fell for every two that advanced in the MSCI Asia-Pacific gauge. China’s CSI 300 index retreated after falling for a seventh straight week last week.
Workers at Samsung Electronics Co. are expected to walk off assembly lines on Monday, kicking off the largest organized labor action in the South Korean conglomerate’s half-century history.
The People’s Bank of China said it will carry out temporary bond repurchase or reverse repurchase operations depending on the market situation on business days between 4:00 p.m. and 4:20 p.m., with the aim of maintaining reasonable and sufficient liquidity in the banking system, it said in a statement on Monday.
Federal Reserve Chair Jerome Powell’s testimony before Congress and U.S. inflation data are due later this week. Traders will be watching the two events to consolidate bets that monetary policy easing could begin as early as September amid signs the U.S. economy is cracking after a weak jobs report.
The prospect of a Fed interest rate cut in the coming months received a boost on Friday after nonfarm payrolls data showed U.S. hiring and wage growth slowed in June, while the unemployment rate rose to the highest level since late 2021.
“The good news on the risk front is that we are still at levels of growth, consumption and employment that largely indicate that if the Fed is going to ease monetary policy it is for risk management reasons,” Chris Weston, head of research at Pepperstone Group, wrote in a note to clients. “It is when the market feels that the Fed needs to ease monetary policy beyond neutrality and stimulate the economy that earnings estimates are reduced and stocks typically suffer a prolonged decline.”
In the United States, President Joe Biden is facing a new round of danger from members of his own party as he tries to salvage his struggling reelection campaign and fend off calls from Democratic lawmakers for him to step aside. Biden posted his best showing yet in a Bloomberg News/Morning Consult tracking poll in battleground states, even as voters offered withering assessments of his debate performance.
U.S. Election Day volatility has eased since the debate between Biden and rival Donald Trump, according to RBC strategist Amy Wu Silverman.
“One interpretation: markets (and polls) are pricing in a decisive Trump victory. If you use the 2016 playbook, this is positive for markets,” he wrote in a note on Sunday. “And yet, if you look at Trump’s policy statements on tariffs, immigration, and perhaps even Fed independence, you could say they all create volatility.”
Elsewhere, traders will be keeping a close eye on rate decisions in New Zealand and South Korea. Earnings from major U.S. banks including JPMorgan Chase & Co. are expected, while Powell is scheduled to give his semiannual testimony on Capitol Hill on Tuesday, followed by a series of Federal Reserve speakers.
In commodities, oil rose ahead of reports from the Organization of the Petroleum Exporting Countries and the International Energy Agency this week, which will shed light on global crude balances. Traders are also monitoring the path of Tropical Storm Beryl as it approaches Texas. Gold pulled back from a six-week high reached last week.
Key events this week include:
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Indian Prime Minister Narendra Modi visits Moscow on Monday
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Federal Reserve Chairman Jerome Powell delivers his semiannual testimony before the Senate Banking Committee on Tuesday
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U.S. Treasury Secretary Janet Yellen testifies before the House Financial Services Committee on Tuesday
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Federal Reserve Vice Chair for Supervision Michael Barr and Governor Michelle Bowman speak Tuesday
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China CPI and PPI, Wednesday
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Japan CPI, Wednesday
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Federal Reserve Chairman Jerome Powell testifies before the House Financial Services Committee on Wednesday
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Chicago Fed President Austan Goolsbee and Fed Governor Michelle Bowman speak Wednesday
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BOE Chief Economist Huw Pill and BOE Policymaker Catherine Mann speak on Wednesday
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US CPI and initial jobless claims, Thursday
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Atlanta Federal Reserve President Raphael Bostic and St. Louis Federal Reserve President Alberto Musalem speak
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Japan industrial production, Friday
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Trade with China, Friday
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Consumer Confidence, PPI, University of Michigan, USA, Friday
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Citigroup, JPMorgan, Wells Fargo and Bank of New York Mellon report quarterly earnings on Friday
Some of the main movements in the markets:
Stocks
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S&P 500 futures fell 0.1% as of 10:56 a.m. Tokyo time.
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Nikkei 225 (OSE) futures rose 0.2%
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Japan’s Topix index fell 0.3%
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Australia’s S&P/ASX 200 index fell 0.4%
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Hong Kong’s Hang Seng fell 1.2%
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The Shanghai Composite fell 0.5%
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Euro Stoxx 50 futures were little changed
Coins
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Bloomberg Dollar Spot Index little changed
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The euro fell 0.1% to $1.0829.
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The Japanese yen rose 0.2 percent to 160.46 per dollar.
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The offshore yuan was unchanged at 7.2900 per dollar.
CRYPTOCURRENCIES
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Bitcoin fell 4.3% to $54,828.76
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Ether fell 5% to $2,849.4
Captivity
Raw Materials
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West Texas Intermediate crude fell 0.5% to $82.76 a barrel
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Spot gold fell 0.3% to $2,385.68 an ounce
This story was produced with assistance from Bloomberg Automation.
–With assistance from Michael G. Wilson and Matthew Burgess.
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