Euro wins thanks to French vote, China looks forward to PMI: markets round

(Bloomberg) — The euro strengthened on signs that Marine Le Pen’s far-right party is unable to govern outright after the first round of French parliamentary elections. Asian shares will be in focus amid further signs that China’s economy is struggling.

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Early election results showed Le Pen’s National Rally winning by a smaller margin than some polls had indicated, with opponents already devising a strategy to keep the far-right party out of power. The euro rose in Asian trading after the results eased concerns that a very strong performance for Le Pen’s party would have boosted the chances of an expansionary fiscal policy, further clouding the outlook for the common currency.

“A scenario where North Korea could rule on its own now seems less likely,” sending the euro higher as concerns about fiscal largesse eased, said Rodrigo Catril, a strategist at National Australia Bank in Sydney. “We now have to wait and see how the second round will develop and whether other parties can forge a united opposition to RN.”

Japanese shares rose at the open, while futures contracts in Hong Kong fell. Investors will be keeping a close eye on Chinese stocks on Monday after factory activity contracted for a second straight month in June. Caixin China’s private manufacturing PMI release is also scheduled for later Monday.

These moves came as concerns remained over whether Asia’s stock rally could continue. While the MSCI Asia Pacific index rose 2.1% last quarter, its third straight quarterly gain, a deteriorating Chinese economy saw the country’s shares enter a technical correction last week, as investors worry that the pace of Japan’s second-quarter stock market rally could slow down. half of the year.

Elsewhere in Asia, South Korean currency traders will remain on edge amid fears of a rise in volatility as the won’s new trading hours come into effect. Confidence among major Japanese producers rose, data showed on Monday, leaving the door open for the Bank of Japan to consider a rate hike later this month. The yield on the country’s 10-year benchmark bond rose by three basis points.

One in three economists surveyed by Bloomberg expects a rate hike at the next meeting. The yen fell to its lowest level since 1986 last week, prompting some analysts to flag an increased risk of a rate move as Governor Kazuo Ueda has vowed to keep a close eye on the yen’s impact on inflation.

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Economical cooling

As the quarter ended Friday in the U.S., a raft of data showed the world’s largest economy is cooling without lasting harm to consumers. U.S. consumer confidence fell less than initially estimated on expectations that inflationary pressures will ease and the Fed’s preferred inflation gauge marked the smallest increase in six months. US government bonds fell lower on Monday.

Traders will shift attention to European assets later Monday, amid moves by Le Pen’s opposition to form alliances to prevent her right-wing party from gaining power in the second round of voting. Of interest will be bond markets after investor demand to hold 10-year French government bonds over safer German debt rose to more than 80 basis points ahead of the vote, a level last seen during the sovereign debt crisis in the euro area.

“If they start to look credible, we could see French markets recover,” said Kathleen Brooks, research director at XTB Ltd. “If fears of a far-right government start to subside, we should see that in the French-German yield spread. First.”

In company news, shares of Boeing Co. will be front and center when U.S. markets open after agreeing to acquire Spirit AeroSystems Holdings Inc. on Sunday. in an all-stock deal that values ​​the company at $4.7 billion, according to people with knowledge of the matter. of the transaction. However, the US Department of Justice will charge the company with criminal fraud, forcing the aircraft manufacturer to choose between pleading guilty or taking the risk of going to trial.

On the commodity front, little changed in the oil sector as traders assessed China’s economic prospects and geopolitical risks in Europe and the Middle East. Gold headed lower after wobbling on Friday as traders digested US inflation data.

Main events this week:

• Retail sales in Australia, 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 on Monday

• President of the Bundesbank Joachim Nagel speaks on Monday

• RBA publishes minutes of its June policy meeting on Tuesday

• South Korean CPI, Tuesday

• CPI eurozone, unemployment, Tuesday

• Fed Chairman Jerome Powell speaks Tuesday

• ECB President Christine Lagarde speaks on Tuesday

• China Caixin serves PMI, Wednesday

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

• Tariff decision Poland, Wednesday

• US FOMC minutes, ISM services, factory orders, trade, initial unemployment claims, durable goods, Wednesday

• ECB President Christine Lagarde speaks on Wednesday

• New York Fed President John Williams speaks Wednesday

• The Swedish Riksbank will publish the minutes of the June meeting on Wednesday

• Trading in Australia, Thursday

• Trade in Brazil, Thursday

• British general election, Thursday

• Preliminary European Union tariffs on Chinese electric vehicles will be introduced on Thursday

• ECB publishes report of June policy meeting on Thursday

• American Independence Day, Thursday

• Philippines CPI, Friday

• Taiwan CPI, Friday

• Thailand CPI, International Reserves, Friday

• Eurozone retail sales, Friday

• French trade, industrial production, Friday

• Germany industrial production, Friday

• ECB President Christine Lagarde speaks on Friday

• Unemployment Canada, Friday

• U.S. unemployment, nonfarm payrolls, Friday

• New York Fed President John Williams speaks, Frida

Some of the major moves in the markets:

Shares

• 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 changed

• The euro rose 0.2% to $1.0739

• The Japanese yen was little changed at 160.94 per dollar

• The offshore yuan was little changed at 7.2997 per dollar

• The Australian dollar was little changed at $0.6673

Cryptocurrencies

• Bitcoin rose 1% to $62,542.6

• Ether rose 0.4% to $3,430.15

Bonds

• The yield on ten-year government bonds rose by two basis points to 4.41%

• The Japanese ten-year yield rose by three basis points to 1.080%

• The Australian ten-year yield rose by 11 basis points to 4.42%

Raw materials

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

• Gold fell 0.2% to $2,323 an ounce

This story was produced with the help of Bloomberg Automation.

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