(Bloomberg) — European stocks are heading for their worst week since October on growing concerns about political unrest in France. U.S. stock futures fell as traders sought safe havens.
Most read on Bloomberg
The Stoxx 600 weakened by 0.8% to extend its losses since Monday to 2.2%. France’s CAC 40 index erased this year’s gains, with banking stocks such as BNP Paribas SA and Société Générale SA among the biggest losers. The euro fell to its lowest level against the dollar since April.
The S&P 500 and Nasdaq 100 are expected to open lower after hitting record highs each day this week. The dollar rose against major global currencies, while Treasury yields fell four basis points.
European markets are growing increasingly worried after French President Emmanuel Macron announced snap parliamentary elections following his party’s defeat in European Parliament elections. Investors fear that a victory for Marine Le Pen’s far-right National Rally party, well ahead in the polls, would lead to looser fiscal policy.
Uncertainty caused the premium France pays on its debt relative to Germany to soar this week, matching the largest movement dating back to the 2011 European debt crisis.
“It is difficult to ignore the parallels between our current situation and the days of the sovereign debt crisis, as the focus is on election results, sovereign bond spreads and debt sustainability,” said Jim Reid, an analyst at Deutsche Bank AG. This is “associated with no obvious sign of where things are going.”
The week’s turmoil erased all this month’s gains for the regional benchmark, with investors warning that volatility could persist until the conclusion of French elections in July.
“Elections in France tend to be more volatile for equity markets than in other developed markets,” Beata Manthey, head of European equity strategy at Citigroup Inc., told Bloomberg Television. This volatility could continue for a little longer.
However, the current weakness does not change the underlying strengthening of European profits and the economy as a whole, she said.
In Asia, the MSCI Asia-Pacific index fell as losses in Australian and Chinese stocks offset gains in the Japanese benchmark.
The Bank of Japan triggered further weakness in the yen after making investors wait until its July meeting for details of its reduction in bond purchases, a move that was also seen as a delay in normalization of his policy. Governor Kazuo Ueda nevertheless opposed the idea that a rate hike was no longer possible next month.
“A weak yen could weigh on foreign investor flows this summer,” said Hiromi Ishihara, head of equity investments at Amundi Japan. “That said, we still think the BoJ is poised for another hike this year.”
Key events this week:
Chicago Fed President Austan Goolsbee speaks Friday
Consumer sentiment from the American University of Michigan, Friday
Some of the main market movements:
Actions
The Stoxx Europe 600 fell 0.8% at 10:55 a.m. London time
S&P 500 futures fell 0.4%
Nasdaq 100 futures fell 0.2%
Dow Jones Industrial Average futures fell 0.7%
MSCI Asia Pacific Index little changed
MSCI Emerging Markets Index little changed
Currencies
The Bloomberg Dollar Spot Index rose 0.3%
The euro fell 0.5% to $1.0687
The Japanese yen was little changed at 157.12 per dollar.
The offshore yuan was little changed at 7.2730 per dollar.
The British pound fell 0.4% to $1.2706.
Cryptocurrencies
Bitcoin rose 0.3% to $66,905.3
Ether rose 1% to $3,512.31
Obligations
The 10-year Treasury yield fell four basis points to 4.21%
The German 10-year yield fell 10 basis points to 2.37%
The UK 10-year yield fell eight basis points to 4.05%
Raw materials
Brent crude changed little
Spot gold rose 0.7% to $2,321.33 an ounce
This story was produced with the help of Bloomberg Automation.
–With help from Winnie Hsu and James Hirai.
Most read from Bloomberg Businessweek
©2024 Bloomberg LP
