European equities continued to decline on Monday as market concerns about the political unrest in France persisted. US Treasuries, meanwhile, rose ahead of the Federal Reserve’s interest rate decision on Wednesday and important inflation data. For the third day in a row, the Stocks 600 declined while the euro marginally declined. Additionally, US equities futures dipped as ten-year Treasury rates declined four basis points, as investors sought safe haven assets.

Markets in Focus in France

In France, the yield on 10-year notes increased by as much as 10 basis points to 3.32%, indicating the biggest market movements. With this gain, the difference over similar German bonds has widened to 64 basis points, the biggest closing basis since October, marking the greatest two-day spike since March 2020.

Speculation that President Emmanuel Macron would contemplate resigning if his party does poorly in the forthcoming legislative elections added to the anxieties of traders. Investors are uneasy due to the political unpredictability, even if a source close to Macron refuted these rumors. Since Macron took office in 2017, investors have been mostly encouraged by his economic measures; but, the next election is seen as a crucial test of those programs. The stakes have increased since Macron called the election on Monday in response to far-right adversaries’ big win in the European Parliament elections.

According to Jane Foley, director of FX strategy at Rabobank, “the risk that the far-right leads the French parliament may focus attention on France’s dire fiscal situation, which could shake up the euro.” “We believe that the euro is going to stay lower for a longer period of time due to French political reasons.”

International Market Responses

With the publication of the most recent US consumer price index (CPI) data and the Federal Reserve’s rate decision on Wednesday, investors around the world are bracing themselves for another possibly turbulent session. Although it is generally anticipated that authorities would maintain the current low interest rates, their projected rates are less definite. In their “dot plot,” 41% of economists predict that officials would cut rates twice, while an equal proportion believe that rates will be cut only once or not at all, according to a Bloomberg study.

“We think we’re just cashing out, even if we get one cut this year,” Wei Li, chief investment strategist at BlackRock Global, said to Bloomberg TV. “We’re really focusing on the earnings and growth piece, which has been driving equities rather than rates this year, so the equity market can take it.”

The likelihood of rate reduction later this year has improved in the UK due to an unanticipated increase in the unemployment rate. By November, traders will have fully priced in the first quarter-point drop, and there is a 40% probability of a second one the following month. In a different event, the nation saw record-breaking orders for bonds, totaling over £104 billion ($132 billion) in gilt sales.

Key Market Events This Week

Several significant economic events are scheduled for this week, which could further influence market movements:

– China PPI and CPI (Wednesday)

– Germany CPI (Wednesday)

– US CPI and Fed rate decision (Wednesday)

– G-7 leaders summit (June 13-15)

– Eurozone industrial production (Thursday)

– US PPI and initial jobless claims (Thursday)

– Tesla annual meeting (Thursday)

– New York Fed President John Williams moderates a discussion with Treasury Secretary Janet Yellen (Thursday)

– Bank of Japan’s monetary policy decision (Friday)

– Chicago Fed President Austan Goolsbee speaks (Friday)

– US University of Michigan consumer sentiment (Friday)

Market Performance

Stocks

– The Stoxx Europe 600 fell 0.6% as of 12:04 p.m. London time.

– S&P 500 futures fell 0.3%.

– Nasdaq 100 futures fell 0.3%.

– Futures on the Dow Jones Industrial Average fell 0.4%.

– The MSCI Asia Pacific Index fell 0.5%.

– The MSCI Emerging Markets Index fell 0.4%.

Currencies

– The Bloomberg Dollar Spot Index rose 0.1%.

– The euro fell 0.2% to $1.0741.

– The Japanese yen was little changed at 157.10 per dollar.

– The offshore yuan was little changed at 7.2718 per dollar.

– The British pound was little changed at $1.2743.

Cryptocurrencies

– Bitcoin fell 4% to $66,807.82.

– Ether fell 3.9% to $3,529.15.

Bonds

– The yield on 10-year Treasuries declined four basis points to 4.43%.

– Germany’s 10-year yield declined one basis point to 2.66%.

– Britain’s 10-year yield declined three basis points to 4.29%.

Commodities

– Brent crude fell 0.3% to $81.42 a barrel.

– Spot gold fell 0.2% to $2,307.02 an ounce.

European markets are being rocked by political unrest in France, which is having a big effect on the rest of the world as investors wait for important economic data and policy announcements. Market trends are expected to be determined by a combination of political and economic developments throughout the coming week.