Euro Edges Lower on French Vote, Asian Stocks Gain: Markets Wrap

(Bloomberg) — The euro crept lower on concern about France’s post-election finances, while Asia’s benchmark share index rose, helped by gains in Taiwan.

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The common currency slid as much as 0.4% before trimming losses, with no French political party poised to win the majority needed to govern. While that heightens the risk of political instability, it also potentially constrains the influence of a left-wing New Popular Front coalition and Marine Le Pen’s National Rally, both of which propose higher public spending.

“We view the outcome as broadly market-friendly, with National Rally-related risks disappearing for now and the left/far-left NFP set to fall far short of a majority with essentially no prospect of being able to enact its agreed alliance agenda,” Krishna Guha, a strategist at Evercore ISI, wrote in a note to clients.

Bitcoin fell with other cryptocurrencies due to concern over possible sales of the token by creditors of the failed Mt. Gox exchange. The MSCI Asia Pacific Index of regional shares rose slightly, thanks to the technology sector. Heavyweight Taiwan Semiconductor Manufacturing Co. rose to a record after Morgan Stanley increased its price target.

France was the big focus for investors early Monday. The New Popular Front — which includes the Socialists and far-left France Unbowed — won 178 seats in the National Assembly, according to data compiled by the Interior Ministry. National Rally, which pollsters last week had seen winning the election, came third with 143, while President Emmanuel Macron’s centrist alliance notched up 156.

French government bond futures underperformed their German peers, though in a sign of jitters waning, the spread between the two has begun to narrow.

For the remainder of the week, events in the US will likely shape trading.

Federal Reserve Chair Jerome Powell’s congressional testimony and US inflation data are among the main events this week. Traders will be looking to the two to solidify bets policy easing may begin as early as September amid signs the US economy is weakening based on the latest jobs report.

The prospect of a Fed interest-rate cut in coming months got a boost on Friday after nonfarm payrolls data showed US hiring and wage growth stepped down in June, while the jobless rate rose to the highest since late 2021.

Earnings from major US banks including JPMorgan Chase & Co. are also due, as are rate decisions in New Zealand and South Korea.

President Joe Biden faces a fresh round of hazards from members of his own party as he seeks to salvage his embattled reelection bid and fend off calls from Democratic lawmakers to step aside. Biden registered his best showing yet in a Bloomberg News/Morning Consult tracking poll of battleground states, even as voters offered withering appraisals of his debate performance.

US Election Day volatility has declined since the debate between Biden and his challenger Donald Trump, according to RBC strategist Amy Wu Silverman.

“One interpretation: Markets (and polls) are pricing a decisive Trump victory,” she wrote in a note Sunday. “Using the 2016 playbook, this is a net positive for markets. And yet if you look to Trump’s policy statements on tariffs, immigration and perhaps even the independence of the Federal Reserve — these are arguably all vol-generating.”

In commodities, both gold and oil steadied. In the case of the latter, traders tracked twin threats to production posed by a storm in the US and wildfires in Canada.

Key events this week include:

Indian Prime Minister Narendra Modi visits Moscow, Monday
Fed Chair Jerome Powell delivers semi-annual testimony to the Senate Banking Committee, Tuesday
US Treasury Secretary Janet Yellen testifies to the House Financial Services Committee, Tuesday
Fed Vice Chair for Supervision Michael Barr, Governor Michelle Bowman speak, Tuesday
China PPI, CPI, Wednesday
Japan PPI, Wednesday
Fed Chair Jerome Powell testifies to the House Financial Services Committee, Wednesday
Chicago Fed President Austan Goolsbee and Fed Governor Michelle Bowman speak, Wednesday
BOE chief economist Huw Pill, BOE policy maker Catherine Mann speak, Wednesday
US CPI, initial jobless claims, Thursday
Atlanta Fed President Raphael Bostic, St. Louis Fed President Alberto Musalem speak
Japan industrial production, Friday
China trade, Friday
US University of Michigan consumer sentiment, PPI, Friday
Citigroup, JPMorgan, Wells Fargo and Bank of New York Mellon report quarterly earnings, Friday