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

(Bloomberg) — The euro climbed on signs Marine Le Pen’s far-right party was poised to claim victory in the first round of France’s legislative elections less comfortably than some polls projected.

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Initial election results showed Le Pen’s National Rally in front of President Emmanuel Macron’s centrist alliance, though possibly without the votes than it needs to secure an absolute majority after a second round of voting next week. A very strong showing for Le Pen’s party would have increased the odds of expansive fiscal policy, further muddying the outlook for the common currency.

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

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

Elsewhere in Asia, South Korean currency traders will be on tenterhooks amid fears of an increase in volatility as the won’s new trading hours come into effect. Confidence among Japan’s large manufacturers rose, data on Monday showed, leaving the door open for the central bank to consider an interest-rate increased later this month. Yield for the nation’s 10-year bond rose 2.5 basis points.

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

Economy Cooling

As the quarter ended in the US on Friday, a swath of data indicated the world’s biggest economy is cooling without lasting damage to consumers. US consumer sentiment declined by less 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.

In commodities, oil was little changed as traders gauged China’s economic outlook and geopolitical risks in Europe and the Middle East.

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, Wednesday
US FOMC minutes, ISM Services, factory orders, trade, initial jobless claims, durable goods, Wednesday
ECB President Christine Lagarde speaks, Wednesday
New 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
New York Fed President John Williams speaks, Friday