(Bloomberg) — Asian stocks are set to fall in early trading as concern over a political crisis in France fans anxiety in global markets, while a flurry of central bank decisions this week may signal delays to the long-awaited easing cycle.
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Equity futures in Australia, Japan and Hong Kong point to opening losses after the S&P 500 edged lower Friday, benchmark 10-year Treasuries rose and gold rallied. US contracts were little changed in early trading.
The flight to haven assets came as risk sentiment turned sour, with a gauge of global stocks falling the most in two weeks as the fallout from France’s snap parliamentary election threatened to spill over into the European Union. The greenback rose to the highest since November and the euro fell the most in two months last week, while the spread between French and German bonds widened the most on record.
Traders are “being guided on perceived risk through the aggressive widening of yield premium seen in the French 10-year bond yield over the German 10-year bund,” Chris Weston, head of research at Pepperstone Group in Melbourne, wrote in a note to clients. “The evolving theme in French politics continues to see market players attempting to price risk and uncertainty around the future French fiscal position.”
A coalition of France’s left-wing parties presented a manifesto to pick apart most of Macron’s seven years of economic reforms and set the country on a collision course with the EU over fiscal policy. Traders will be closely watching European bond futures when they open in Asia after far-right leader Marine Le Pen said she won’t try to push out President Emmanuel Macron if she wins France’s snap parliamentary election in an appeal to moderates and investors.
Days after the Federal Reserve pared back projections for US monetary easing this year, policymakers from the UK to Australia are likely to signal this week that they’re still not convinced enough about disinflation to start lowering borrowing costs themselves. Emerging market policy makers, including in Indonesia and Brazil, are also likely to push back on rate cut expectations.
The People’s Bank of China is expected to inject some extra cash when it rolls over its medium-term lending facility on Monday, but most economists project it will leave the rate on the funds unchanged at 2.5%. The decision comes ahead of key data including industrial production, retail sales, home prices and property investment as policy makers implement measures to prop up the real estate market.
“The property market hasn’t bottomed out yet, but the government policy is definitely turning to the easing side more decisively,” Min Dai, head of Asia macro strategy at Morgan Stanley, wrote in a note to clients. “Whether it will work remains to be seen.”
US stocks struggled to gain traction Friday after a gauge of consumer sentiment sank to a seven-month low as high prices continued to take a toll on views of personal finances. The S&P 500 closed mildly lower, led by a drop in industrial shares. Tech outperformed, with Adobe Inc. up 15% on a strong outlook. The Stoxx Europe 600 slid 1%, while France’s CAC 40 Index extended losses to over 6% last week, the most since March 2022.
Australian bonds were steady in early trading Monday after Treasury 10-year yields edged lower on Friday. Federal Reserve Bank of Minneapolis President Neel Kashkari at the weekend said the central bank can take its time and watch incoming data before starting to cut interest rates, echoing sentiment from Cleveland Fed President Loretta Mester who still sees inflation risks as tilted to the upside.
In commodities, oil held above $78 a barrel while gold edged lower after Friday’s surge amid haven demand.
This week, traders will also be watching inflation readings in Europe and the UK to help finesse bets on the global monetary policy outlook. Meantime, a swath of Federal Reserve officials including Dallas Fed President Lorie Logan, Chicago Fed President Austan Goolsbee and Fed Governor Adriana Kugler are due to speak.
Some of the main moves in markets:
Stocks
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S&P 500 futures were little changed as of 8:17 a.m. Tokyo time
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Hang Seng futures fell 0.7%
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S&P/ASX 200 futures fell 0.2%
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Nikkei 225 futures fell 1%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0704
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The Japanese yen fell 0.1% to 157.56 per dollar
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The offshore yuan was little changed at 7.2716 per dollar
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The Australian dollar was little changed at $0.6616
Cryptocurrencies
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Bitcoin rose 0.3% to $66,659.99
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Ether rose 0.8% to $3,628.7
Bonds
Commodities
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West Texas Intermediate crude fell 0.1% to $78.37 a barrel
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Spot gold fell 0.2% to $2,328.53 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Michael G. Wilson.
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