Written by Ankur Banerjee
SINGAPORE (Reuters) – Asian stocks fell on Monday as traders weighed the outlook for U.S. interest rates, while the euro rose after the far right won a smaller share of the vote in the first round of a snap election in France than some polls had expected. .
The euro rose 0.32 percent to $1.0747, while European stock futures rose 1 percent after opinion polls showed the National Rally party led by Eurosceptic Marine Le Pen leading in the first round of the French elections, but with fewer votes than some analysts expected.
The shock vote sent markets into turmoil, with the far-right as well as the left-wing coalition, which came in second place on Sunday, vowing to significantly increase spending at a time when France’s high budget deficit prompted the European Union to recommend disciplinary steps.
“The outcome may not have been as bad as the market feared,” said Michael Brown, chief strategist at Pepperstone.
“We’ve also seen a lot of rhetoric from other parties looking to perhaps withdraw their candidates to try to avoid the NRP winning seats in next Sunday’s runoff… Maybe the market will take some solace in that.”
The focus now turns to next Sunday’s runoff and will depend on how the parties decide to join forces in each of the country’s 577 constituencies in the second round, leaving investors uncertain and anxious.
“With this result, markets are looking forward to another week of really high uncertainty. Perhaps fear, as the Conservatives could still secure an absolute majority next week,” said Carsten Brzeski, head of global macroeconomics at ING Bank in Frankfurt.
In Asia, MSCI’s broadest index of Asia-Pacific stocks outside Japan fell 0.18%, to start the second half of the year after rising 7% so far in 2024. Japan’s Nikkei rose 0.57%.
Meanwhile, manufacturing activity in China fell for a second month in June while services activity fell to a five-month low, an official survey showed on Sunday, keeping calls for more stimulus alive as the economy struggles to get back on its feet. Other.
On the macro side, the focus remains on whether and when the Fed will start cutting interest rates, following data released on Friday that showed monthly US inflation was unchanged in May.
In the 12 months through May, the PCE price index rose 2.6% after rising 2.7% in April. Last month’s inflation readings were in line with economists’ expectations. They remain above the Fed’s 2% inflation target.
However, markets are still pricing in at least two Fed rate cuts this year with a 63% chance of a September cut, the CME FedWatch tool showed.
US stocks closed lower on Friday after an early rally failed. (.N)
Among currencies, the yen traded at around 160.98 yen per dollar after the government said, in a rare unscheduled revision of gross domestic product data on Monday, that Japan’s economy shrank more than initially reported in the first quarter.
Data also showed that factory activity in Japan remained unchanged in June amid weak demand and as companies suffered from higher costs due to the weak yen.
The dollar index, which measures the greenback against six rivals, fell to 105.65.
(Editing by Stephen Coates)