European Election Fallout Hits Euro, Stocks: Markets Wrap

(Bloomberg) — The euro fell to its lowest levels in a month after French President Emmanuel Macron called for a legislative vote following a crushing defeat in European Parliament elections.

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The single currency fell 0.4%, falling with European stocks and French bonds. BNP Paribas SA and Societe Generale SA shares fell more than 6% as banks led losses among stocks in Paris.

The gains of the French far right in the vote of European lawmakers prompted Macron to gamble on holding early elections to stop the rise of his rival Marine Le Pen. While German Chancellor Olaf Scholz also suffered humiliating losses, centrist parties across the bloc mostly maintained their positions.

For the currency, the risk from Sunday’s results is that “the European far-right swing becomes entrenched in higher positions of power,” said Simon Harvey, head of FX analysis at Monex Europe. This weakness is likely to remain permanent as long as national opinion polls support strengthening support for Le Pen.

The euro is already in a weak position after suffering its biggest loss in nearly two months on Friday, as stronger-than-expected US jobs numbers lifted the dollar. Focus will now turn to Fed policymakers updating their interest rate forecasts on Wednesday after last week’s data dampened optimism about the extent of policy easing this year.

“The Fed’s hawkish outcome this Wednesday may be harder to shake off” for the euro than the European elections, Ipek Ozkardskaya, an analyst at Swissquote Bank, said in a note on Monday.

Meanwhile, the dollar strengthened against a basket of currencies, while US stock futures fell. Shares of Southwest Airlines rose as much as 5.5% in premarket trading after the Wall Street Journal reported that Elliott Investment Management had built a roughly $2 billion stake in the U.S. carrier.

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The yield on the 10-year Treasury note rose for a third day.

The MSCI Asia-Pacific equity index was little changed, while traders also focused on India where Prime Minister Narendra Modi is scheduled to outline his government’s portfolios later on Monday.

Some key events this week:

  • UK Unemployment Claims, Unemployment, Tuesday

  • China CPI, Producer Price Index on Wednesday

  • Interest rate decision in Thailand, Wednesday

  • India CPI, Industrial Production, Wednesday

  • UK monthly GDP, Wednesday

  • US Mortgage Applications, Consumer Price Index, Wednesday

  • FOMC decision, quarterly summary of economic outlook, Fed Chairman Jerome Powell’s press conference, Wednesday

  • Unemployment in Australia, Thursday

  • Industrial production in the eurozone, Thursday

  • US Jobless Claims, Producer Price Index, Thursday

  • John Williams of the Federal Reserve Bank of New York moderates the discussion with US Treasury Secretary Janet Yellen on Thursday

  • Tesla annual meeting, Thursday

  • Interest rate decision in Japan, Friday

  • University of Michigan Consumer Confidence, Friday

  • Austin Goolsby, Governor of the Federal Reserve Bank of Chicago, and Federal Reserve Governor Lisa Cook, Friday

Some key movements in the markets:

Stores

  • The Stoxx Europe 600 Index was down 0.7% as of 10:17 AM London time

  • S&P 500 futures fell 0.2%

  • Nasdaq 100 futures fell 0.2%

  • Dow Jones Industrial Average futures fell 0.3%

  • There was little change in the MSCI Asian stock index

  • MSCI Emerging Markets Index fell 0.4%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.2%.

  • The euro fell 0.4 percent to $1.0758

  • There was little change in the Japanese yen at 156.80 to the dollar

  • There was little change in the yuan in external transactions at 7.2654 to the dollar

  • There was little change in the pound sterling at $1.2709

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Digital currencies

  • Bitcoin fell 0.4% to $69,384.41

  • Ethereum fell 0.8% to $3,671.26

Bonds

  • The yield on 10-year Treasury bonds rose two basis points to 4.45%.

  • The yield on German 10-year bonds rose three basis points to 2.65%.

  • The yield on British 10-year bonds rose four basis points to 4.30%.

Goods

This story was produced with assistance from Bloomberg Automation.

– With the help of Subrat Patnaik.

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