(Bloomberg) — European assets extended Monday’s losses as jitters over political upheaval in France continued. US Treasuries gained before inflation data and the Federal Reserve’s interest rate decision on Wednesday.
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The euro edged lower on Tuesday after hitting the weakest level in a month the day before. The benchmark stock index weakened for a third day while 10-year French bonds traded at their highest yield compared to similar German debt since October.
Regional markets are being hit by the fallout from the European Parliament election, with French President Emmanuel Macron calling a legislative vote to halt the advance of his far-right rivals. The election slated later this month risks becoming the ultimate showdown over Macron’s trademark economic policies, which had largely reassured investors since he took office in 2017.
Investors are also preparing for the likelihood of another volatile session Wednesday with both the latest monthly print for US consumer prices and Fed decision due.
While policymakers are widely expected to keep borrowing costs on hold, there’s less certainty on officials’ rate projections. A 41% plurality of economists expect policymakers to signal two cuts in their “dot plot,” while an equal number expect the forecasts to show just one or no cuts at all, according to the median estimate in a Bloomberg survey.
“Even if we just get one cut this year, I think we’re just cashing out,” BlackRock Global Chief Investment Strategist Wei Li told Bloomberg TV. “The equity market can take it because we really focusing on the earnings and growth piece, which has been driving equities rather than rates this year.”
US stock futures dipped after both the S&P 500 and Nasdaq 100 extended their record-rallies in the previous session. The 10-year Treasury benchmark dropped about 4 basis points.
Apple Inc. is set to extend losses after the iPhone maker’s debut of long-awaited artificial intelligence features failed to enthuse traders.
In the UK, an unexpected rise in the jobless rate boosted the outlook for rate cuts later this year. Traders are fully pricing in the first quarter-point reduction by November and see around a 40% chance of a second decrease the following month.
In a separate development, the country attracted over £104 billion ($132 billion) of orders for bonds in a record for gilt sales.
Key events this week:
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China PPI, CPI, Wednesday
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Germany CPI, Wednesday
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US CPI, Fed rate decision, Wednesday
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G-7 leaders summit, June 13-15
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Eurozone industrial production, Thursday
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US PPI, initial jobless claims, Thursday
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Tesla annual meeting, Thursday
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New York Fed President John Williams moderates a discussion with Treasury Secretary Janet Yellen, Thursday
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Bank of Japan’s monetary policy decision, Friday
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Chicago Fed President Austan Goolsbee speaks, Friday
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US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
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The Stoxx Europe 600 fell 0.4% as of 10:26 a.m. London time
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S&P 500 futures fell 0.2%
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Nasdaq 100 futures fell 0.2%
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Futures on the Dow Jones Industrial Average fell 0.3%
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The MSCI Asia Pacific Index fell 0.5%
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The MSCI Emerging Markets Index fell 0.3%
Currencies
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The Bloomberg Dollar Spot Index rose 0.2%
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The euro fell 0.2% to $1.0748
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The Japanese yen fell 0.1% to 157.27 per dollar
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The offshore yuan was little changed at 7.2716 per dollar
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The British pound was little changed at $1.2726
Cryptocurrencies
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Bitcoin fell 3.3% to $67,336.27
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Ether fell 4% to $3,523.32
Bonds
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The yield on 10-year Treasuries declined four basis points to 4.43%
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Germany’s 10-year yield declined two basis points to 2.65%
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Britain’s 10-year yield declined four basis points to 4.28%
Commodities
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Brent crude fell 0.1% to $81.51 a barrel
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Spot gold fell 0.3% to $2,304.07 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Allegra Catelli.
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