By Wayne Cole
(Reuters) – A look at what’s ahead for the day in European and global markets, according to Wayne Cole.
All the moaning about a far-right victory in France appears to have been premature, with polls suggesting the leftist New Popular Front alliance won the most seats, albeit well short of a majority.
Pollsters, which are usually accurate, forecast the left would win between 184 and 198 seats in the 577-seat assembly, with President Emmanuel Macron’s centrist alliance at 160-169 and Marine Le Pen’s nationalist and eurosceptic National Rally (RN) party and its allies at 135-143.
Analysts assume that Macron will try to govern with the cooperation of the left, although it is unclear exactly how that will look in practice.
The decisive moment will come in the autumn, when the new government is due to present its 2025 budget, and analysts suspect it will do little to tackle France’s fiscal deficit and debt burden equivalent to 112% of GDP.
That outlook tempered initial relief at the far-right’s failure to take power, and left the euro down about 0.1% at $1.0826. French bond futures were also slightly lower, and so far the market reaction has been limited.
Stocks were broadly supported by growing confidence that the Federal Reserve will cut rates in September following the weak June payrolls report.
Futures now imply a 76% chance of an easing on Sept. 18, with 53 basis points of easing priced in for this year, up from around 40 basis points a month ago.
Federal Reserve Chairman Jerome Powell will have a chance to offer his perspective when he appears before Congress on Tuesday and Wednesday, while several other Fed officials will speak this week.
Earnings season also kicks off this week, with JPMorgan Chase, Citigroup and Wells Fargo reporting on Friday. PepsiCo and Delta Air Lines also report results.
The S&P 500 trades at about 21 times forward earnings estimates, but if you exclude the top 10 stocks by market value, that figure falls to 16.5 on average for the rest of the index.
Key events that could influence markets on Monday:
– Jonathan Haskel, member of the Monetary Policy Committee of the Bank of England, gives a speech
– The Minister of Economy, Carlos Cuerpo, will speak at an event in Europa Press
– German trade figures for May, Sentix Eurozone index for July
(By Wayne Cole; edited by Christopher Cushing)