Stocks, Euro Rise as Traders Parse French Election: Markets Wrap

(Bloomberg) — European stocks snapped a four-day losing streak and the euro rose as French election results suggested there’s a smaller probability of extreme policies coming from the far-right.

Most Read from Bloomberg

Traders interpreted the first round of legislative voting as an indication that Marine Le Pen’s party faces a tougher-than-expected road to overall victory, reducing the risks of spending plans that would rattle financial markets. The 10-year spread on French-German debt narrowed to a two-week low.

“Markets are quite content there’s no apparent absolute majority,” said Claudia Panseri, chief investment officer for France at UBS Wealth Management. “The most extreme scenarios for the spread have been excluded.”

France’s CAC 40 Index jumped as much as 2.8% before retracing some gains. Banking stocks led the advance in Europe’s Stoxx 600 Index, as French lenders Societe Generale SA, BNP Paribas SA and Credit Agricole SA all surged by more than 5%. The euro climbed to its strongest level since mid June.

Beyond Europe, US equity futures rose by about 0.3%. Spirit AeroSystems Holdings Inc. rallied 6.3% in premarket trading after Boeing Co. agreed to buy back the supplier in an all-stock deal that values it at $4.7 billion. Chewy Inc. shares soared 29% after influential investor Keith Gill disclosed a 6.6% passive stake in the online pet food and product retailer. Treasury yields ticked higher.

France’s second round of voting will be held on July 7. The French political world is now embarking on a period of horse-trading. In constituencies where three people qualified for the runoffs, the third-placed candidate can withdraw to boost the chances of another mainstream party defeating the far right.

“It’s hard to argue that you’ve got a good outcome,” Sebastian Raedler, head of European equity strategy at Bank of America, said on Bloomberg Television. “Maybe you block a majority by the hard right. But in the best-case scenario, you get a hung parliament. That effectively means very little decision making, no ability to deal with a very wide budget deficit, and also the European integration story effectively put on hold.”

Meanwhile, as US investors prepare for the second-quarter reporting season, Goldman Sachs Group Inc. strategists said Corporate America faces the highest earnings bar in almost three years.

Story continues

Single-stock analysts predict profits at S&P 500 firms rose 9% on average in the April-June period — the biggest year-over-year increase since the fourth quarter of 2021, Goldman strategists led by David Kostin wrote in a note.

“The magnitude of earnings-per-share beats is likely to diminish as consensus forecasts set a higher bar than in previous quarters,” Kostin said. “We expect the outperformance ‘reward’ for stocks beating estimates will be smaller than average again this quarter.”

In emerging markets, South African assets rallied after President Cyril Ramaphosa announced a new cabinet that includes members of the opposition Democratic Alliance, considered business-friendly by investors.

In commodities, oil rose as traders assessed economic outlook and geopolitical risks in Europe and the Middle East. Iron ore rose amid tentative signs of recovery in China’s steel-intensive property market, and speculation that Beijing could do more to support the sector.

Key events this week:

• US construction spending, ISM Manufacturing, Monday

• ECB President Christine Lagarde speaks, Monday

• Bundesbank President Joachim Nagel speaks, Monday

• RBA issues minutes of June policy meeting, Tuesday

• South Korea CPI, Tuesday

• Eurozone CPI, unemployment, Tuesday

• Fed Chair Jerome Powell speaks, Tuesday

• ECB President Christine Lagarde speaks, Tuesday

• Australia retail sales, Wednesday

• China Caixin services PMI, Wednesday

• Eurozone S&P Global Eurozone Services PMI, PPI, Wednesday

• Poland rate decision, Wednesday

• US FOMC minutes, ISM Services, factory orders, trade, initial jobless claims, durable goods, Wednesday

• ECB President Christine Lagarde speaks, Wednesday

• New York Fed President John Williams speaks, Wednesday

• Sweden’s Riksbank issues minutes of June meeting, Wednesday

• Australia trade, Thursday

• UK general election, Thursday

• European Union provisional tariffs on China EVs set to be introduced, Thursday

• ECB publishes account of June’s policy meeting, Thursday

• US Independence Day holiday, Thursday

• Thailand CPI, international reserves, Friday

• Eurozone retail sales, Friday

• France trade, industrial production, Friday

• Germany industrial production, Friday

• ECB President Christine Lagarde speaks, Friday

• Canada unemployment, Friday

• US unemployment, nonfarm payrolls, Friday

• New York Fed President John Williams speaks, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.2% as of 8:26 a.m. New York time

• Nasdaq 100 futures rose 0.3%

• Futures on the Dow Jones Industrial Average rose 0.2%

• The Stoxx Europe 600 rose 0.7%

• The MSCI World Index rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro rose 0.3% to $1.0742

• The British pound rose 0.2% to $1.2668

• The Japanese yen fell 0.2% to 161.26 per dollar

Cryptocurrencies

• Bitcoin rose 1.2% to $62,633.86

• Ether rose 1.4% to $3,463.05

Bonds

• The yield on 10-year Treasuries advanced four basis points to 4.44%

• Germany’s 10-year yield advanced eight basis points to 2.58%

• Britain’s 10-year yield advanced six basis points to 4.23%

Commodities

• West Texas Intermediate crude rose 0.6% to $82.03 a barrel

• Spot gold rose 0.4% to $2,335.41 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Sagarika Jaisinghani.

Most Read from Bloomberg Businessweek

©2024 Bloomberg L.P.