June 22, 2024

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European Election Fallout Hits Euro, Bonds: Markets Wrap

European Election Fallout Hits Euro, Bonds: Markets Wrap

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

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The single currency fell 0.6%, falling alongside European stocks, with BNP Paribas SA and Societe Generale SA down more than 8% as banks led losses among stocks in Paris. The yield on 10-year French government bonds reached its highest level this year.

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 held their ground.

“The scale of the losses for some ruling parties was surprising,” said Sonia Martin, head of foreign exchange and monetary policy research at DZ Bank. “The euro is reacting to this fear of more conflict in Europe, more discord.”

The already weak currency entered lower 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.

Meanwhile, US stock futures were little changed ahead of the Federal Reserve’s report and the release of May inflation data, also scheduled for Wednesday.

“It’s not about whether the Fed will cut rates once or twice this year,” said Mohit Kumar, chief economist and strategist for Europe at Jefferies. “The right question is if the economy weakens, is the Fed prepared to cut? The answer to these questions remains largely yes, which means the Fed remains on the table.”

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In premarket trading, Southwest Airlines stock rose as much as 7.3% after the Wall Street Journal reported that Elliott Investment Management had built a roughly $2 billion stake in the U.S. carrier. GameStop Corp trimmed some losses on meme stocks on Friday after announcing plans to sell new shares.

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

The MSCI Asia-Pacific equity index was little changed, while traders also focused on India where Prime Minister Narendra Modi is set to outline his government 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

  • S&P 500 futures were down 0.2% as of 6:41 a.m. New York time.

  • Nasdaq 100 futures fell 0.1%

  • Dow Jones Industrial Average futures fell 0.3%

  • The Stoxx Europe 600 index fell by 0.6%.

  • MSCI World Index fell 0.2%

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Currencies

  • The Bloomberg Dollar Spot Index rose 0.3%.

  • The euro fell 0.6 percent to $1.0733

  • The British pound fell 0.2 percent to $1.2691

  • There was little change in the Japanese yen at 156.88 to the dollar

Digital currencies

  • Bitcoin fell 0.5% to $69,351.91

  • Ethereum fell 0.7% to $3,673.48

Bonds

  • The yield on the 10-year Treasury note rose by three basis points to 4.46%.

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

  • The UK 10-year bond yield rose five basis points to 4.31%.

Goods

  • There was little change in West Texas Intermediate crude

  • Spot gold rose 0.2 percent to $2,297.24 an ounce

This story was produced with assistance from Bloomberg Automation.

– With the help of Subrat Patnaik.

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