Asian Stocks Flat, Euro Slides On French Election Concerns

This is source I found from another site, main source you can find in last paragraph

Monday 21:15 BST

What you need to know

• The euro is losing momentum after touching a six-month high, down 0.6 per cent at $1.0927

• New York equity markets broadly flat but Nasdaq edges higher to record; European equities markets fall back, led lower by banks after early momentum from the French election fades

• The yield on French government debt is up 1 basis points to 0.78 per cent as investors turn mildly negative on the debt

• Oil prices see-sawed between session gains and losses as leading Opec producer Saudi Arabia stepped up verbal interventions into the market with a pledge to do “whatever it takes” to secure global rebalancing

Hot topic

Global stocks inched back from record highs and the euro slipped from a six-month peak as Emmanuel Macron’s win in the French presidential election signalled a pause in the buying of assets that have set a stellar run in widespread anticipation of his triumph.

“Markets have reacted with a bit of a yawn to Macron’s win in the French presidential election,” said Shaun Osborne of Scotiabank.

“The win looks to have been well-priced in to the euro, with news of the result driving the euro briefly above $1.10 in early [Asian] trading before it slid steadily lower over the balance of the session. Profit-taking and position adjustment dominate proceedings at the moment.”

Julius Baer analysts argued that the Macron win allowed markets to forget politics for the time being and focus instead on the economy.

“The German parliamentary elections in September will probably be decided between [Angela] Merkel’s CDU/CSU and the SPD, with no chance for the EU-critical AfD,” said Julius Baer’s David A Meier.

“Therefore, investors should enjoy some calm for the next months as European markets will acknowledge less European break-up risks and be able to enjoy the back-winds from benign economic data, at least until the Italian elections, due in 2018, come into focus.

“With the defeat of anti-EU [Marine] Le Pen in France, populist risks fade and the economic data are back in the driver’s seat for European markets. Without the political drag, the euro can profit further from the improving economic backdrop in the eurozone.”

The French election “turned out to be a buy the first round, sell the second round affair”, added Jasper Lawler of London Capital Group.

“French shares fell on Monday with the CAC 40 index down significantly more than other European equity benchmarks. It’s not disappointment in Macron, who is widely seen as business-friendly, but just that the market saw this result coming a mile away. The French dip has already been bought.”

Equities

The FTSE All-World index set an all-time high in early trading on Monday, powered by the best performance for Asian stocks — up 1.4 per cent — for nearly two months.

But the momentum stalled in European and US trading hours, leaving the global gauge just 0.1 higher for the day. In New York, the S&P 500 closed flat while the Nasdaq edged marginally higher to a fresh record high as the Euro Stoxx 600 in Europe ended 0.2 per cent down.

The notable loser was Paris benchmark the CAC 40, which gave up 0.9 per cent despite opening the session with a nine-year high. Similarly, Frankfurt’s Xetra Dax index retreated 0.2 per cent after setting a fresh lifetime peak in early hours.

Analysts were nonetheless bullish on the outlook for European risk assets. “Macron has taken this year’s most significant tail risk to the euro area economic outlook off the table, leaving intact economic conditions conducive to strengthening and increasingly broad-based GDP growth,” said Chris Scicluna of Daiwa Capital Markets Europe.

Tokyo markets reopened after a three-day holiday and the Topix made up for lost time with a rise of 2.3 per cent and gains across the board, led by the energy sector and real estate stocks.

Hong Kong’s benchmark Hang Seng index rose 0.4 per cent.

Commodities

Oil prices have been volatile, oscillating around the flatline but comfortably below the $50 a barrel mark amid concerns about rising US output and increasing scepticism over Opec’s ability to keep a lid on global production.

An assurance on Monday by Khalid al-Falih, Saudi Arabia’s energy minister, to end the supply glut steadied recent oil selling and prices edged higher later in the session.

Brent crude, the international benchmark, gained 0.6 per cent on the day to $49.38 a barrel after an overall fall last week of 5.1 per cent. West Texas Intermediate, the US marker, rose 0.5 per cent to $46.46 a barrel. It finished last week down 6.3 per cent.

Gold is off 0.1 per cent at $1,226 an ounce, largely unmoved by confirmation of Mr Macron’s election win.

Currencies

The euro fell 0.6 per cent to $1.0927 after initially climbing to a six-month high of $1.1022.

“While some further relief cannot be excluded we see further euro upside as limited, also because net short positions in the euro were scaled back already last week in anticipation of a Macron win,” said Tim Sprissler of Credit Suisse.

Highlighting how US interest rate rises could hobble any advance for the euro derived from more robust economic data in the eurozone, he added: “Over the medium term, we see the US dollar strengthening against the euro again, back into the range that prevailed in much of this year to date.”

A strong session for the US currency saw the US dollar index climb 0.5 per cent with sterling drifting 0.3 per cent lower to $1.2941 against the greenback.

Investor relief at the French outcome was still evident in the movements of the Japanese yen — a perceived haven — which weakened to 0.4 per cent to ¥113.22 per dollar.

Fixed income

French 10-year yields rose 1 basis point to 0.78 per cent while Bund yields were flat at 0.42 per cent, according to Reuters data.

That took the premium investors demand to invest in benchmark French debt over Germany’s equivalent paper, which is perceived as the safest in the region, back to a level last seen in December.

Yields on 10-year US Treasuries climbed 4bp to 2.39 per cent. “Fed speak this morning remained consistent with the view that policymakers will hike rates again at their June policy deliberations,” said Steven Ricchiuto of Mizuho. “After the unexpectedly large decline in the jobless rate to 4.4 per cent in April, members of the committee are increasingly confident that steady progress has been made towards achieving their policy goal.”

Asia sovereign bond yields rose in response to gains for regional stocks and investors’ perception of lowered risk following the French vote. The yield on 10-year Japanese government bonds was up 1bp, to 0.024 per cent while the 10-year Australian yield climbed 3bp to 2.674 per cent.

Additional reporting by Michael Hunter in London and Hudson Lockett in Hong Kong

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This is source I found from another site, main source you can find in last paragraph

Source : https://www.ft.com/content/bf20f612-338c-11e7-99bd-13beb0903fa3

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