(Bloomberg) — The euro fell lower on concerns about French finances after the election, while Asia’s benchmark stock index rose, helped by gains in Taiwan.
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The common currency fell as much as 0.4% before paring losses, with no French political party on the verge of winning the majority needed to govern. While that increases the risk of political instability, it may also limit the influence of a left-wing coalition of the New Popular Front and Marine Le Pen’s National Rally, both of which propose higher government spending.
“We view the outcome as broadly market-friendly, with the risks associated with the National Rally disappearing for the time being and the left/far-left NFP falling far short of a majority, with essentially no prospect of being able to implement the agreed alliance -agenda. Krishna Guha, a strategist at Evercore ISI, wrote in a note to clients.
Bitcoin fell along with other cryptocurrencies due to concerns over the possible sale of the token by creditors of the failed Mount Gox exchange. The MSCI Asia Pacific Index of regional shares rose slightly thanks to the technology sector. The heavyweight Taiwan Semiconductor Manufacturing Co. rose to a record after Morgan Stanley raised its price target.
France was the main focus for investors early Monday. The New Popular Front – which also includes the Socialists and the far-left France Unbowed – won 178 seats in the National Assembly, according to data collected by the Interior Ministry. The National Rally, which pollsters said had won last week’s election, came third with 143, while President Emmanuel Macron’s centrist alliance came in at 156.
French government bond futures underperformed those in Germany, although the spread between the two has started to narrow in a sign of easing tension.
Events in the US will likely determine trading for the rest of the week.
Fed Chairman Jerome Powell’s testimony in Congress and US inflation figures are among the most important events this week. Traders will look to the two to bolster expectations that policy easing could begin as early as September, amid signs that the US economy is weakening based on the latest jobs report.
The prospect of a Fed rate cut in coming months got a boost on Friday after non-farm payrolls data showed US employment and wage growth slowed in June, while unemployment rose to the highest level since late 2021.
Earnings from major US banks, including JPMorgan Chase & Co., are also coming, as are interest rate decisions in New Zealand and South Korea.
President Joe Biden faces a new set of dangers from members of his own party as he tries to salvage his embattled re-election bid and fend off calls from Democratic lawmakers to step aside. Biden registered his best performance yet in a Bloomberg News/Morning Consult poll of battleground states, even as voters gave scathing assessments of his debate performance.
According to RBC strategist Amy Wu Silverman, US election day volatility has decreased since the debate between Biden and his challenger Donald Trump.
“One interpretation: the markets (and polls) are pricing in a decisive Trump victory,” she wrote in a note on Sunday. “Using the 2016 playbook, this is a net positive for the markets. And yet, if you look at Trump’s policy statements on tariffs, immigration and perhaps even Federal Reserve independence – these are all probably generating a lot of volume.”
In the commodities sector, both gold and oil remained stable. In the latter case, traders followed two threats to production, caused by a storm in the US and forest fires in Canada.
Key events this week include:
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Indian Prime Minister Narendra Modi visits Moscow on Monday
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Fed Chairman Jerome Powell delivers semiannual testimony before the Senate Banking Committee on Tuesday
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US Treasury Secretary Janet Yellen will testify before the House Financial Services Committee on Tuesday
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Fed Vice Chairman for Oversight Michael Barr and Governor Michelle Bowman speak Tuesday
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Chinese PPI, CPI, Wednesday
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Japanese PPI, Wednesday
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Fed Chairman Jerome Powell is testifying 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 will speak on Wednesday
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US CPI, initial unemployment claims, Thursday
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Atlanta Fed President Raphael Bostic and St. Louis Fed President Alberto Musalem speak
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Japan’s industrial production, Friday
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Chinese trade, Friday
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University of Michigan Consumer Confidence Report, PPI, Friday
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Citigroup, JPMorgan, Wells Fargo and Bank of New York Mellon will publish their quarterly figures on Friday
Some of the major moves in the markets:
Shares
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S&P 500 futures fell 0.1% as of 12:12 p.m. Tokyo time
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Nikkei 225 futures (OSE) rose 0.4%
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Japan’s Topix fell 0.1%
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Australia’s S&P/ASX 200 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 rose 0.2%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro fell 0.1% to $1.0827
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The Japanese yen rose 0.2% to 160.39 per dollar
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The offshore yuan was little changed at 7.2869 per dollar
Cryptocurrencies
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Bitcoin fell 3.7% to $55,156.66
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Ether fell 4% to $2,877.63
Bonds
Raw materials
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West Texas Intermediate crude fell 0.4% to $82.80 a barrel
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Gold fell 0.4% to $2,382.64 an ounce
This story was produced with the help of Bloomberg Automation.
–With assistance from Michael G. Wilson and Matthew Burgess.
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