Euro Rises Post-French Vote; Stocks to Drop Monday: Markets Wrap

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(Bloomberg) — Stocks are set to start the week lower as investors weigh the potential for more aggressive interest-rate increases on the economy and earnings. The euro gained after Emmanuel Macron’s win in the French election removed a key risk for markets.

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Futures fell in Japan and earlier in Hong Kong. U.S. contracts wavered after the S&P 500 capped the longest run of weekly losses since January, while the Nasdaq 100 is poised for the worst month since 2008 as traders ratchet up expectations for steep policy tightening to tame inflation.

Macron defeated far-right leader Marine Le Pen in the French presidential election on a pro-business platform, bolstering the euro. The dollar was mixed against other major currencies. A dollar gauge closed higher Friday.

Investors will also be keeping a close watch on any policy measures from China as Chinese assets are under pressure, with the yuan dropping to a one-year low Friday. The nation’s Covid-zero policy amid a Covid outbreak is also weighing on sentiment.

Risk assets remain under pressure with bond markets boosting their longer-term inflation expectations. Federal Reserve Chair Jerome Powell endorsed a 50 basis-point increase next month and at least one more such move, outlining his most bold approach yet to reining in surging prices. Stronger tightening signals from the European Central Bank are also undermining risk appetite.

“There has been little to avert the investor pessimism as inflation and interest rate expectations start to bite,” Geir Lode, head of global equities at Federated Hermes Ltd., said in a note. “In particular due to the uncertainty of the macro environment, expectations are low with regard to forward estimates and guidance, building on lowered expectations from the previous quarter.”

The war in Ukraine continues to provide an uncertain backdrop for the markets. U.S. Secretary of State Antony Blinken and Defense Secretary Lloyd Austin arrived in Kyiv for talks as Russia’s war on Ukraine enters its third month.

Oil fell toward $100 a barrel — after sliding for the third week in four — as China lockdowns amplify demand fears. Markets in Australia and New Zealand are closed for holidays Monday.

Events to watch this week:

  • Tech earnings include Alphabet, Meta Platforms, Amazon, Apple

  • EIA oil inventory report, Wednesday

  • Australia CPI, Wednesday

  • Bank of Japan monetary policy decision, Thursday

  • U.S. 1Q GDP, weekly jobless claims, Thursday

  • ECB publishes its economic bulletin, Thursday

Some of the main moves in markets:

Stocks

  • S&P 500 futures fell 0.2% as of 7:48 a.m. in Tokyo. The S&P 500 fell 2.8%

  • Nasdaq 100 futures fell 0.2% The Nasdaq 100 fell 2.7%

  • Nikkei 225 futures fell 1.2%

  • Hang Seng Index futures fell 1.2% earlier

Currencies

  • The Japanese yen fell 0.2% to 128.78 per dollar

  • The offshore yuan was at 6.5292 per dollar

  • The Bloomberg Dollar Spot Index rose 0.7% Friday

  • The euro rose 0.1% to $1.0801

Bonds

Commodities

  • West Texas Intermediate crude fell 1.4% to $100.63 a barrel

  • Gold was at $1,932.43 an ounce

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