(Bloomberg) — Asian stocks are likely to fall in early trading as concerns about a political crisis in France fuel unrest in global markets, while a flurry of central bank decisions this week could signal delays in the long-awaited easing cycle .
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Stock futures in Australia, Japan and Hong Kong pointed to opening losses after the S&P 500 moved lower on Friday, 10-year Treasuries rose and gold rose. US contracts were little changed in early trading.
The flight into assets came as risk sentiment deteriorated, with a gauge of global equities falling by the most in two weeks as the fallout from snap parliamentary elections in France threatened to spill over to the European Union. The dollar rose to its highest level since November and the euro fell the most in two months last week, while the spread between French and German bonds widened the most ever.
Traders are being “guided on perceived risk by the aggressive increase in the yield premium seen in the French 10-year bond yield versus the German 10-year bond,” wrote Chris Weston, head of research at Pepperstone Group in Melbourne, in a note to customers. “The evolving theme in French politics continues to see market players attempting to assess risks and uncertainty surrounding France’s future fiscal position.”
A coalition of left-wing parties in France presented a manifesto aimed at tearing apart most of Macron’s seven years of economic reforms and putting the country on a collision course with the EU over fiscal policy. Traders will keep a close eye on European bond futures when they open in Asia after far-right leader Marine Le Pen said she will not try to push out President Emmanuel Macron if she wins snap parliamentary elections in France, in an appeal to moderates and investors.
Days after the Federal Reserve scaled back expectations for US monetary easing this year, policymakers from Britain to Australia are likely to signal this week that they are still not convinced enough about disinflation to start cutting rates themselves. the borrowing costs. Policymakers in emerging markets, including in Indonesia and Brazil, are also likely to scale back expectations for interest rate cuts.
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 expect it to leave the interest rate on the funds unchanged at 2.5%. The decision comes ahead of key data such as industrial production, retail sales, house prices and real estate investment, as policymakers implement measures to support the real estate market.
“The real estate market has not yet bottomed out, but government policy is certainly firmly focused on the easing side,” Min Dai, head of Asia macro strategy at Morgan Stanley, wrote in a note to clients. “Whether it will work remains to be seen.”
U.S. stocks struggled to gain traction on Friday after a gauge of consumer confidence fell to a seven-month low, as high prices continued to take a toll on views on personal finance. The S&P 500 closed slightly lower, led by a decline in industrial stocks. Technology performed better, with Adobe Inc. 15% up on strong prospects. The Stoxx Europe 600 fell 1%, while the French CAC 40 Index extended losses to more than 6% last week, the highest level since March 2022.
Australian bonds were steady in early trading on Monday after 10-year government bond yields edged lower on Friday. Federal Reserve Bank of Minneapolis President Neel Kashkari said over the weekend that the central bank could take its time and monitor the incoming data before starting to cut rates, echoing the sentiment of Cleveland Fed president Loretta Mester, who still sees inflation risks as positive.
In commodities, oil remained above $78 a barrel, while gold fell after Friday’s surge on port demand.
This week, traders will also be watching inflation figures in Europe and Britain to fine-tune their bets on the outlook for global monetary policy. Meanwhile, a slew of Federal Reserve officials, including Dallas Fed President Lorie Logan, Chicago Fed President Austan Goolsbee and Fed Governor Adriana Kugler, will speak.
Some of the major moves in the markets:
Shares
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Futures on the S&P 500 were little changed at 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
Raw materials
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West Texas Intermediate crude fell 0.1% to $78.37 a barrel
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Gold fell 0.2% to $2,328.53 an ounce
This story was produced with the help of Bloomberg Automation.
–With assistance from Michael G. Wilson.
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