Asian Stocks Subdued as Traders Ponder U.S. Rates Outlook; Euro Rises After France’s Election

Keywords: Asian stocks, U.S. rates outlook, euro, France election, market reaction, far-right, National Rally, European stock futures

Asian stock markets started the week subdued on Monday, with traders closely monitoring the outlook for U.S. interest rates. Meanwhile, the euro saw gains following the unexpected results of France’s snap election, where the far-right performed better than anticipated.

Market Reactions to France’s Election

The euro appreciated by 0.32% after the first round of voting in France’s snap election saw Marine Le Pen’s far-right National Rally (RN) secure around 34% of the vote. Although the far-right’s share was less than some polls had projected, the results still unsettled markets due to the RN’s significant lead over its rivals. The left-wing alliance that came second has also promised increased spending, which is concerning given France’s high budget deficit.

European stock futures rose by 1%, and French OAT bond futures gained 0.15% as investors processed the election outcomes. The market’s response indicated a mix of relief and ongoing caution.

Analysts’ Perspectives

Michael Brown, a senior strategist at Pepperstone, noted that the election result might not be as detrimental as initially feared. He highlighted efforts by other parties to prevent the RN from winning seats in the upcoming runoff, which has provided some market reassurance.

Vasu Menon, managing director of investment strategy at OCBC, expressed concerns about the potential for market disruption if the far-right wins a majority in the French Parliament, which could lead to clashes with the EU.

Asian Market Performance

In Asia, the MSCI’s broadest index of Asia-Pacific shares outside Japan edged up by 0.07%, continuing its upward trend with a 7% rise so far in 2024. Japan’s Nikkei increased by 0.57%, while Chinese stocks experienced a slight decline. Blue-chip stocks in China fell by 0.45%, and Hong Kong’s Hang Seng Index remained flat.

Conclusion

As traders weigh the implications of U.S. interest rates and the outcomes of France’s election, market movements reflect a blend of caution and optimism. The focus will now shift to the upcoming runoff in France and its potential impact on European markets and the euro.

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