Global Stocks Under Pressure from French Election Risks and Rate-Cut Delays

Global markets face turbulence due to France's election risks and potential delays in interest rate cuts by central banks. Explore key events and market movements.

Jun 17, 2024 - 09:42
Jun 17, 2024 - 09:43
Global Stocks Under Pressure from French Election Risks and Rate-Cut Delays
Global Stocks Under Pressure from French Election Risks and Rate-Cut Delays

Global stocks and bonds are under pressure as investors react to uncertainties from the upcoming French elections and signals that central banks may not cut interest rates soon.

In the U.S., futures for the S&P 500 and Nasdaq 100 remained steady. Tech companies, including Autodesk Inc., saw gains after reports that activist investor Starboard Value had taken a stake in the company. U.S. Treasuries saw a decline, with 10-year yields rising by five basis points.

French Election Concerns

The French elections are causing anxiety among investors. The uncertainty around the elections has increased political risks, which had previously driven the S&P 500 to new highs. Euro-area bond yields have risen, with France’s yield premium over Germany remaining at its highest in years.

“Foreign investors are nervous about the political risks in France,” said Frédérique Carrier, head of investment strategy at RBC Wealth Management.

Monetary Policy Outlook

Monetary policy is a key concern for the markets. The Bank of England's upcoming meeting might indicate that policy easing will be delayed until August. Central banks in Australia and Norway, which are also meeting this week, may also postpone rate cuts.

Several Federal Reserve officials, including Philadelphia Fed President Patrick Harker and Minneapolis Fed President Neel Kashkari, are scheduled to speak this week. Fed Chair Jerome Powell has not given clear guidance on when interest rates might be lowered, suggesting that the Fed will take a cautious approach based on incoming economic data.

Economic Data and Events

Key economic events and data releases this week include:

  • Monday: US Empire Manufacturing, ECB Chief Economist Phillip Lane speaks, Philadelphia Fed President Patrick Harker speaks

  • Tuesday: Australia rate decision, Chile rate decision, Eurozone CPI, Singapore trade, US retail sales, business inventories, industrial production, cross-border investment, speeches by Richmond Fed President Thomas Barkin, Dallas Fed President Lorie Logan, Fed Governor Adriana Kugler, St. Louis Fed President Alberto Musalem, and Chicago Fed President Austan Goolsbee

  • Wednesday: Japan trade, Bank of Japan minutes, UK CPI, Bank of Canada Summary of Deliberations, Brazil rate decision

  • Thursday: New Zealand GDP, China loan prime rates, Indonesia rate decision, Eurozone consumer confidence, Norway rate decision, Switzerland rate decision, Eurozone finance ministers meeting, UK BOE rate decision, US housing starts, initial jobless claims

  • Friday: Japan CPI, Hong Kong CPI, India S&P Global Manufacturing PMI, Eurozone S&P Global Manufacturing PMI, S&P Global Services PMI, UK S&P Global / CIPS Manufacturing PMI, US existing home sales, Conference Board leading index, Canada retail sales, speech by Richmond Fed President Thomas Barkin

Market Movements

  • Stocks: Futures for the S&P 500 and Nasdaq 100 were stable, while Dow Jones Industrial Average futures fell 0.2%. The Stoxx Europe 600 fell 0.2%, and the MSCI World Index fell 0.1%.

  • Currencies: The Bloomberg Dollar Spot Index rose 0.1%. The euro remained stable at $1.0711. The British pound fell 0.1% to $1.2668. The Japanese yen dropped 0.3% to 157.91 per dollar.

  • Cryptocurrencies: Bitcoin declined by 1.4% to $65,567.18. Ether dropped by 2% to $3,525.76.

  • Bonds: The yield on 10-year U.S. Treasuries rose by five basis points to 4.27%. Germany’s 10-year yield increased by six basis points to 2.42%. Britain’s 10-year yield rose by five basis points to 4.10%.

  • Commodities: West Texas Intermediate crude increased by 0.5% to $78.84 a barrel. Spot gold fell 0.6% to $2,319.67 an ounce.

With ongoing uncertainties from the French elections and potential delays in interest rate cuts, investors remain cautious. The economic data and central bank meetings scheduled for this week will play a crucial role in shaping market sentiment and financial strategies moving forward.

Also Read: Traders Defy Federal Reserve, Market Rallies Despite Rate Warnings

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