Leader of right-wing opposition party Les Republicains Eric Ciotti (centre) and member of parliament and previous candidate for French president Marine Le Pen of the National Rally (right) attend a press conference in Paris on 24 June 2024 of the French extreme right party Rassemblement National. (Photo: EPA-EFE / Mohamed Badra) Initial election results showed Le Pen’s National Rally in front of President Emmanuel Macron’s centrist alliance, though possibly without the votes that it needs to secure an absolute majority after a second round of voting next week. A very strong showing for Le Pen’s party would have increased the odds of expansive fiscal policy, further muddying the outlook for the common currency.
“A scenario where NR could rule on its own now looks less likely,” and that boosted the euro as concerns on fiscal largess eased, said Rodrigo Catril, a strategist at National Australia Bank in Sydney. “We now need to wait and see how the second round shapes up and if other parties can cobble together a united opposition to RN.”
Japanese stocks rallied, while futures contracts in Hong Kong slipped. Investors will have a keen eye on Chinese stocks after a report showed factory activity contracted for a second straight month in June. The private Caixin China manufacturing PMI release is also scheduled for release later Monday.
Elsewhere in Asia, South Korean currency traders will be on tenterhooks amid fears of an increase in volatility as the won’s new trading hours come into effect. Confidence among Japan’s large manufacturers rose, data on Monday showed, leaving the door open for the central bank to consider an interest-rate increase later this month. Yield for the nation’s 10-year bond rose 2.5 basis points.
One in three economists surveyed by Bloomberg predicts a rate hike at the next gathering. The yen dropped to the lowest level since 1986 last week, prompting some analysts to flag a heightened risk of a rate move as Governor Kazuo Ueda has pledged to watch the yen’s impact on inflation closely.
Economy cooling
As the quarter ended in the US on Friday, a swath of data indicated the world’s biggest economy is cooling without lasting damage to consumers. US consumer sentiment declined by less than initially estimated on expectations inflationary pressures will moderate and the Fed’s preferred inflation gauge marked its smallest advance in six months. Treasuries edged lower on Monday.
In commodities, oil was little changed as traders gauged China’s economic outlook and geopolitical risks in Europe and the Middle East.