PARIS (Reuters) – The main European stock markets are expected to fall on Monday the day after the end of the European elections marked by a surge in far-right movements and the dissolution of the National Assembly in France, which creates political uncertainties.
According to the first available indications, the Parisian CAC 40 should lose 0.54% at the opening. The Dax in Frankfurt could fall 0.23%, while the FTSE 100 in London is expected to drop 0.67%. The EuroStoxx 50 index is expected to fall by 0.42%.
The results of the European elections in France placed the National Rally well in the lead, which led Emmanuel Macron to announce, to everyone’s surprise, a dissolution of the National Assembly. In the rest of Europe, the European People’s Party of Christian Democrats (EPP) should certainly remain the main force in the Strasbourg Parliament, but the score of the Eurosceptic nationalist parties is likely to raise questions about the challenges linked to the Russia, China or even climate change.
“The advance of the populist right and the early elections in France will further complicate decision-making within the EU, at a time when Europe must pull itself together to stop Putin, improve its competitiveness, protect the climate, managing immigration, dealing with China and preparing for a possible second term of Donald Trump in the United States,” emphasizes Holger Schmieding from Berenberg.
In addition to political risk, the week ahead is busy with, among other things, the monetary policy meeting of the American Federal Reserve (Fed) and macroeconomic inflation indicators in several European countries and the United States.
On the monetary policy side, after the decisions of the Bank of Canada (BoC) and the European Central Bank (ECB) to lower their interest rates, eyes should turn to the Fed. The American central bank is expected to keep its key rates unchanged on Wednesday, the day of the publication of the monthly consumer price index in the country after reporting an employment report which sowed doubt on Friday about the trajectory of rates.
In the euro zone, the market is awaiting consumer price figures in Germany (Wednesday), France (Friday) and Spain (Thursday) among others before those of the entire bloc (June 18), which could have an impact on the evolution of the cost of credit.
A WALL STREET
The New York Stock Exchange ended slightly lower on Friday, as the robustness of the American labor market raised doubts about the timing of the Fed’s rate cuts.
The Dow Jones index lost 0.24% to 38,794.29 points. The broader S&P-500 lost 0.13%, to 5,345.95 points. The Nasdaq Composite fell 0.25% to 17,130.33 points.
With the economy creating more jobs than expected in May in the United States, analysts have downgraded the likelihood of a rate cut in September.
In terms of values, Gamestop collapsed (-39.38%) in volatile exchanges with the return of the influencer “Roaring Kitty” on Youtube, while Nvidia finished stable (-0.09%), its valuation being dropped below the $3,000 billion mark, behind that of Apple.
IN ASIA
On the Tokyo Stock Exchange, the Nikkei index advanced 0.9% to 39,031.83 points, supported by the weakness of the yen following the publication of the American employment report on Friday. The broader Topix gained 0.99% to 2,782.37 points.
Export stocks such as Toyota Motor (+1.58%) and the financial sectors of insurance (+2.47%) and banks (+1.39%) are sought after.
Trading is reduced in Asia, with Australia, China, Hong Kong and Taiwan closed for public holidays.
The MSCI index bringing together stocks from Asia and the Pacific (excluding Japan) lost 0.46%.
VALUES TO FOLLOW IN EUROPE:
EXCHANGES/RATES
The euro fell to its lowest since May 9 on Monday in Asian trading, as traders assessed the extent of political uncertainties in the euro zone’s second-largest economy. Around 05:20 GMT, the euro is trading at 1.0749 dollars (-0.45%).
“The prospects of a victory for the far right in early elections in France could keep the euro under pressure in the short term,” said Mansoor Mohi-Uddin, chief economist at Bank Of Singapore.
The dollar rose 0.20% against a basket of reference currencies, after reaching 105.09 points, its highest level since May 30. The greenback, which already gained 0.8% on Friday, is supported by the robustness of the job market in the United States.
The yield on ten-year US Treasury bonds rose 2.3 basis points to 4.4512%, reflecting the prospect of higher rates over a longer period in the United States after the employment report.
OIL
Despite the strengthening of the dollar and the prospect of high Fed key rates, oil prices rose on Monday in a context of anticipation of an increase in fuel demand this summer in the United States.
Brent rose 0.26% to $79.83 per barrel and American light crude (West Texas Intermediate, WTI) rose 0.25% to $75.72.
(Written by Claude Chendjou, edited by Blandine Hénault)
