Europe Stocks Gain as Traders Assess Global Risks: Markets Wrap

(Bloomberg) — European stocks edged higher and US futures were little changed as investors assessed political volatility in France and elsewhere, while traders awaited policy decisions from major central banks due this week.

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The Stoxx 600 was up 0.3% at the open after tumbling last week. The euro posted small moves against the dollar. The yield on benchmark 10-year Treasuries ticked up two basis points, while the greenback was little changed. MSCI’s Asia Pacific Index fell the most in two weeks, with Japanese stocks leading the decline.

Escalating concern about political volatility in France spurred a flight to haven assets at the end of last week, with a gauge of global stocks falling the most in two weeks on Friday and the spread between French and German bonds widening sharply. A potential far-right majority in France is among the factors fueling risks around European equities, according to Citigroup strategists, who downgraded the region to neutral from overweight.

“The investor uncertainty over ballot boxes shows up again – with the last two weeks highlighting the risks of volatility,” said Bob Savage, head of markets strategy and insights at BNY Mellon.

A coalition of France’s left-wing parties presented a manifesto to pick apart most of President Emmanuel Macron’s seven years of economic reforms and set the country on a collision course with the EU over fiscal policy. Far-right leader Marine Le Pen said she won’t try to push out Macron if she wins France’s snap parliamentary election, in an appeal to moderates and investors.

ECB Officials See No Cause for Alarm Over French Market Turmoil

Interest-rate policy will remain in focus this week after Federal Reserve Bank of Minneapolis President Neel Kashkari over the weekend said the central bank can take its time and watch incoming data before starting to cut interest rates.

Policymakers from the UK to Australia are likely to signal that they’re still not convinced enough about disinflation to start lowering borrowing costs. And a swath of Fed officials including Dallas Fed President Lorie Logan, Chicago Fed President Austan Goolsbee and Fed Governor Adriana Kugler are due to speak.

For Bond Traders, Data Matter More Than What the Fed Is Saying

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Traders will also be watching inflation readings in Europe and the UK to help finesse bets on the global monetary policy outlook.

In China, the PBOC kept its one-year MLF interest rate unchanged. A slew of key economic data came mixed. While May retail spending beat estimates, industrial expansion slowed in May, a sign that deep imbalances in the economic recovery may be easing at least a little. Chinese property developers’ shares fell after home prices declined at a faster pace in May, as the country’s most forceful efforts to support the property market took time to revive demand.

In commodities, oil slipped after its biggest weekly advance since early April.

Key events this week:

• Italy CPI, Monday

• US Empire manufacturing, Monday

• ECB Chief Economist Phillip Lane speaks, Monday

• Philadelphia Fed President Patrick Harker speaks, Monday

• Australia rate decision, Tuesday

• Chile rate decision, Tuesday

• Eurozone CPI, Tuesday

• Singapore trade, Tuesday

• US retail sales, business inventories, industrial production, cross-border investment, Tuesday

• Richmond Fed President Thomas Barkin, Dallas Fed President Lorie Logan, Fed Governor Adriana Kugler, St. Louis Fed President Alberto Musalem, Chicago Fed President Austan Goolsbee, Tuesday

• Japan trade, Wednesday

• Bank of Japan issues minutes of April policy meeting, Wednesday

• UK CPI, Wednesday

• Bank of Canada issues Summary of Deliberations, Wednesday

• Brazil rate decision, Wednesday

• New Zealand GDP, Thursday

• China loan prime rates, Thursday

• Indonesia rate decision, Thursday

• Eurozone consumer confidence, Thursday

• Norway rate decision, Thursday

• Switzerland rate decision, Thursday

• Eurozone finance ministers meet, Thursday

• UK BOE rate decision, Thursday

• US housing starts, initial jobless claims, Thursday

• Japan CPI, Friday

• Hong Kong CPI, Friday

• India S&P Global Manufacturing PMI, Friday

• Eurozone S&P Global Manufacturing PMI, S&P Global Services PMI, Friday

• UK S&P Global / CIPS Manufacturing PMI, Friday

• US existing home sales, Conf. Board leading index, Friday

• Canada retail sales, Friday

• Richmond Fed President Thomas Barkin speaks, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.3% as of 8:04 a.m. London time

• S&P 500 futures were little changed

• Nasdaq 100 futures rose 0.1%

• Futures on the Dow Jones Industrial Average were little changed

• The MSCI Asia Pacific Index fell 0.7%

• The MSCI Emerging Markets Index fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0697

• The Japanese yen was little changed at 157.32 per dollar

• The offshore yuan was little changed at 7.2721 per dollar

• The British pound fell 0.1% to $1.2672

Cryptocurrencies

• Bitcoin fell 0.5% to $66,103.93

• Ether fell 1.3% to $3,551.35

Bonds

• The yield on 10-year Treasuries advanced one basis point to 4.23%

• Germany’s 10-year yield was little changed at 2.36%

• Britain’s 10-year yield was little changed at 4.05%

Commodities

• Brent crude fell 0.6% to $82.11 a barrel

• Spot gold fell 0.6% to $2,318.55 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Michael G. Wilson, Masaki Kondo and Matthew Burgess.

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