2024-07-08 00:26:38
Asian stocks rose on Monday as investors grew more confident about a US interest rate cut in September, while political uncertainty faced the euro as French elections focused on a hung parliament.
In France, a left-wing coalition unexpectedly took first place ahead of the far right, a landslide that was expected to prevent Marine Le Pen’s (RN) National Rally from leading the government .
The far-right’s victory was a relief to investors, even if they feared that many of President Emmanuel Macron’s pro-market reforms could be called into question by the left’s plans.
“It will be difficult for France to form a government and the likely outcome now is a deal between parts of the left and Macron,” said Holger Schmiedling, chief economist at Berenberg.
“This could be the result of rolling back reforms rather than new reforms. I would say the result is not as bad as it could have been. It could have been much worse.
The single currency fell a fraction in response to $1.0825, after hitting $1.0843 on Friday, as a weak US jobs report weakened the dollar.
The euro was also down 0.25% against the Swiss franc at 0.9680 francs, but remained firm against the yen at 174.00. The dollar was steady at 160.70 yen JPY=EBS>, just off a recent high of 161.86.
Stocks were supported in anticipation of an easing of US policy. MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.1%, extending earlier gains, after hitting a two-year high last week.
The Japanese Nikkei stayed close to its records.
S&P 500 and Nasdaq futures were both down 0.1%. Earnings season kicks off later this week with the release of results from Citigroup, JP Morgan and Well Fargo.
Investors viewed Friday’s jobs report as strengthening the case for a Federal Reserve interest rate cut in September, with futures now suggesting a 77% probability.
Markets have also priced in 53 basis points of easing for this year, up from about 40 basis points a month ago.
“Three-month payroll growth fell sharply to +177k from +249k previously, driven by a downward revision of 111k,” Goldman Sachs analysts wrote.
“We continue to believe that the FOMC will make its first cut in September, followed by quarterly cuts up to a final rate of 3.25-3.5%.”
Government bonds rose after the report, with 10-year yields falling to 4.297% after hitting 4.4930% early last week.
FED Chairman Jerome Powell will have an opportunity to present his view when he appears before Congress on Tuesday and Wednesday, and several other FED officials will be speaking this week.
The main economic event is the US consumer prices report on Thursday, where headline inflation is expected to slow to 3.1% from 3.3%, with core inflation remaining stable at 3.4%.
German inflation data is released on the same day, and China releases consumer prices and trade figures this week.
In commodity markets, gold was near a one-month high at $2,385 an ounce.
Oil prices have risen due to high demand for fuel during the summer and potential supply disruptions from hurricanes in the Gulf of Mexico.
Brent crude gained 22 cents to $86.76 a barrel, while US crude rose 2 cents to $83.18 a barrel.
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