Euro and stocks slip after French election result

Monday 16:30 BST

What you need to know

• The euro is losing momentum after touching a six-month high, down 0.6 per cent at $1.0925

• New York equity markets are muted; European equities markets are falling back, led by banks after early momentum from the French election continues to fade

• Oil prices have also been volatile with both Brent and WTI seesawing either side of the flatline but now edging lower despite Saudi attempts to talk up the market.

Hot topic

Initial relief at Emmanuel Macron’s win helped the euro touch a six-month high of $1.1022. It has since slipped back, as investors start to look past the election.

Koon Chow, strategist at UBP, described the euro as entering “a resting pattern around last Friday’s close”, and said “speculative investors had already shifted into modest-sized long positions over the past three weeks” in anticipation of the result.

European stock markets are following a similar pattern.

The CAC 40 in Paris briefly touched its highest level since 2008 in opening trade before falling back. It is down 0.9 per cent as New York traders join the markets with financial stocks taking the biggest toll. Banks helped the index rally last week into Sunday’s election as investors anticipated a Macron win.

On Wall Street, the S&P 500 is flat in opening trade, as is the Dow Jones Industrial Average.

Frankfurt’s Xetra Dax 30 is down 0.1 per cent, also unable to hold modest gains, while London’s FTSE 100 is flat after intially being helped by a weaker pound. The region-wide Euro Stoxx 600 is down 0.2 per cent while the sub-index tracking the financial sector is down 0.8 per cent.

Julien Lafargue, European equities strategist at JPMorgan, said: “The focus in the eurozone will now likely shift away from politics and move on to the ECB. With a political agenda that should remain relatively light for a few months, the ECB’s meeting on June 8 will probably offer some insights on the key subject of QE tapering.”

While the election result was as expected, investor relief was still evident in the movements of the Japanese yen — a perceived haven — which weakened as much as 0.4 per cent before firming to be virtually flat at ¥112.75 per dollar.

Equities

Financial stocks are slipping in Europe, having rallied into the French election on expectations that Mr Macron would win, leaving them looking ripe for profit-taking.

Tokyo markets reopened after a three-day holiday and the Topix is making 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. Brent crude, the international benchmark, is down 0.3 per cent at $48.97 after an overall fall last week of 5.1 per cent amid growing concerns about rising US output and increasing scepticism over Opec’s ability to keep a lid on global production.

West Texas Intermediate, the US marker, is down 0.1 per cent at $46.15 a barrel. It finished last week down 6.3 per cent.

Gold, after a dip at the open, is up 0.1 per cent at $1,229.99 an ounce, largely unmoved by confirmation of Mr Macron’s election win.

Currencies

The dollar index, which measures the greenback against a basket of global peers, is up 0.5 per cent at 99.101.

The pound is slipping just under the $1.30 mark, of which it has remained shy over recent sessions. It is down 0.4 per cent at $1.2930.

Fixed income

The yield on 10-year French sovereign debt is up 1 basis point at 0.78 per cent. Germany’s 10-year debt yield is flat at 0.42 per cent. That takes 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.

The yield on 10-year US Treasuries is up 2 basis points to 2.37 per cent. Yields move inversely to prices.

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.

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