(Bloomberg) — A renewed wave of volatility gripped global markets as concern over a political crisis in France deepened, driving stocks down while spurring a flight to haven assets — from bonds to gold and the US dollar.
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Equities dropped around the world, with French shares this week losing roughly $200 billion in value — about the size of Greece’s economy — after President Emmanuel Macron called a snap election. The nation’s bonds were at the heart of the rout, with the premium that investors demand to own 10-year debt over safer German peers seeing its biggest weekly surge on record.
ECB Officials See No Cause for Alarm Over French Market Turmoil
“The situation in Europe is starting to get a little dicey,” said Matt Maley at Miller Tabak + Co. “The move is still a long way from developing into another sovereign debt crisis, but with concerns about sky-high sovereign debt levels and bloated budgets, the developments in Europe (and particularly France) are raising some concerns in the marketplace.”
In the US, the stock market also fell after as a gauge of consumer sentiment unexpectedly fell to a seven-month low as high prices continued to take a toll on views of personal finances. Apple Inc. was hit after a news report saying the European Commission plans to allege the company stifles competition on its mobile app store.
The S&P 500 dropped to around 5,420. The Stoxx Europe 600 fell 1%. France’s CAC 40 Index extended losses to over 6% on the week, its biggest slide in the span since March 2022.
Treasury 10-year yields declined three basis points to 4.21%. The dollar headed toward its highest since November. The euro is the worst-performing major currency this week against the greenback.
European Central Bank officials see no cause for alarm in the market turbulence that has engulfed France in the past few days, according to people with knowledge of the matter. A spokesperson for the ECB declined to comment.
Trader anxiety grew after a coalition of France’s left-wing parties presented a manifesto to pick apart most of Macron’s seven years of economic reforms and set the country on a collision course with the European Union over fiscal policy.
“Given the relevance of the French economy to the EU as well as flashbacks to Brexit, we’re sympathetic to the flight-to-quality and the fact that one would need to seriously consider the longer-term prospects for the EU in the event that France follows the UK and leaves the building, as it were,” said Ian Lyngen and Vail Hartman at BMO Capital Markets.
To Thierry Wizman at Macquarie Group, France is moving toward one of two extreme political scenarios.
“Neither of assemblage is dedicated to pro-market principles, nor fiscal responsibility, nor, possibly the single currency.”
Transactions of more than $1 million among the dollar-denominated bonds of major French banks have proliferated in recent days and are now much more frequent than large-ticket trades in their euro-area peers, based on Trace data compiled by Bloomberg. That’s hit the debt of major lenders like BNP Paribas SA and Credit Agricole SA.
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Some of the main moves in markets:
Stocks
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The S&P 500 fell 0.3% as of 12:27 p.m. New York time
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The Nasdaq 100 rose 0.1%
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The Dow Jones Industrial Average fell 0.3%
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The MSCI World Index fell 0.5%
Currencies
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The Bloomberg Dollar Spot Index rose 0.2%
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The euro fell 0.4% to $1.0698
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The British pound fell 0.6% to $1.2684
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The Japanese yen fell 0.2% to 157.32 per dollar
Cryptocurrencies
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Bitcoin fell 1.6% to $65,587.21
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Ether fell 1.9% to $3,411.99
Bonds
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The yield on 10-year Treasuries declined three basis points to 4.21%
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Germany’s 10-year yield declined 11 basis points to 2.36%
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Britain’s 10-year yield declined seven basis points to 4.06%
Commodities
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West Texas Intermediate crude was little changed
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Spot gold rose 1.1% to $2,329 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Andre Janse van Vuuren, Macarena Muñoz, Jan-Patrick Barnert, Alice Gledhill, Sagarika Jaisinghani and Tasos Vossos.
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