Published: 10:30, June 17, 2024 | Updated: 17:22, June 17, 2024
Shares stable, euro downtrodden as political turmoil saps market mood
By Reuters

LONDON - Shares steadied on Monday while the euro remained on the defensive amid political turmoil in Europe, as investors look for direction from a string of central bank meetings in the region this week as well as fresh US economic data.

European stocks recouped a fraction of their losses from last week when French President Emmanuel Macron called a snap election, with banks leading the mini-rally on Monday up 1 percent against a 0.2 percent rise in the benchmark STOXX index.

Macron's surprise move came after far-right and leftist parties gained ground against his centrist administration, raising investor concerns about a budget crisis and triggering a brutal selloff in French markets.

The euro has become emblematic of this angst, down 0.04 percent to $1.07025, after falling to its lowest since May 1 at $1.06678 on Friday.

European Central Bank policymakers told Reuters they had no plans to launch emergency purchases of French bonds to stabilize the market after yield spreads over German bunds widened dramatically amid a flight to safety.

"A French challenge to the region's fiscal arrangements would be problematic and have far-reaching implications," warned analysts at JPMorgan. "At this stage, the situation in the run-up to the first round of voting is still very fluid."

Central banks in Australia, Norway and the UK are all expected to hold rates steady at meetings this week, though the Swiss National Bank (SNB) might ease given the recent strength of the Swiss franc.

Markets have boosted the probability of a cut to 75 percent as political uncertainty in France drove the euro to a four-month trough at 0.9505 francs on Friday.

Asian share markets had earlier fallen. US shares looked set to follow the muted mood, with S&P 500 futures steady, while Nasdaq futures added 0.1 percent following a run of record finishes.

Analysts at Goldman Sachs have raised their year-end target for the S&P 500 to 5,600, from 5,200 and the current 5,431.

"Our 2024 and 2025 earnings estimates remain unchanged but stellar earnings growth by five mega-cap tech stocks have offset the typical pattern of negative revisions to consensus EPS estimates," they wrote in a note.

The main US data of the week will be retail sales for May on Tuesday, where a 0.4 percent bounce is expected after a 0.3 percent drop in April, while markets have a holiday on Wednesday.

At least 10 policymakers from the Federal Reserve are due to speak this week and will no doubt address the market's wagers for two rate cuts this year.

While the Fed itself sounded a hawkish note last week, a trio of soft inflation numbers led futures to price in a 76 percent chance of a cut as early as September and 50 basis points of easing for the year.

The dollar was stable on the yen at 157.45, after briefly spiking above 158.00 on Friday when the BOJ said it would start tapering bond buying a little later than many had wagered on.

Japan's Nikkei slipped 1.9 percent on Monday, with investors now facing a six-week wait to hear details of the Bank of Japan's next tightening steps.

In commodity markets, gold dipped 0.5 percent to $2,321 an ounce, unwinding some of last week's 1.7 percent bounce.

Oil prices held firm. Brent rose 2 cents to $82.64 a barrel as of 0812 GMT, while US crude likewise nudged up to $78.49 per barrel.