European Stocks Advance With Elections in Focus: Markets Wrap – Yahoo Finance

July 4, 2024

(Bloomberg) — European stocks rose as a key election took center stage and investors grew optimistic about a Federal Reserve interest rate cut after U.S. economic data backed up the case for easier monetary policy.

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France’s CAC 40 index rose for a second day in a row ahead of the final vote in the country’s general election scheduled for this weekend. The index continued to rise as opinion polls showed Marine Le Pen’s Rally National and her allies falling well short of a majority. Voting is underway for the UK general election, with the first official exit polls due to be released just after 10pm local time.

The European Stoxx 600 index rose 0.6%, with banking stocks the top gainers. At the close, Stoxx 50 futures held near their highest level since mid-June. U.S. stock futures contracts were little changed as the spot market was closed for Independence Day after the S&P 500 and Nasdaq 100 hit fresh record highs on Wednesday. A gauge of dollar strength fell for a third straight day. The Brazilian real rose for a second straight day on prospects of government spending cuts.

Global stocks are on track to post their longest weekly gain since March after a set of weak U.S. economic data revived hopes of a rate cut in September. Reports on Wednesday showed the U.S. services sector contracted at its fastest pace in four years and the labor market showed signs of further weakness ahead of Friday’s key jobs report.

“Yesterday the ISM services index hit a post-pandemic low of 48.8 and job claims are worsening, but ultimately the negative data is being viewed as positive for the market,” said Justin Onuekusi, chief investment officer at St. James’s Place. “Everyone seems to be focused on September now.”

Among individual stocks, tire maker Continental AG rose after it signaled strong growth in China, while Danish bracelet maker Pandora A/S fell after analysts noted raw material cost pressures the company faces.

Broad stock gains on Thursday were led by Asia, where the region’s MSCI index rose to its highest in more than two years. Japan’s Topix rose to a record high. The yen strengthened after hitting its lowest since 1986 in the previous session.

As for France, political maneuvering to stop the Rally National from winning an absolute majority in the National Assembly has already boosted the value of French government bonds, Morgan Stanley’s Marina Zaboroc and Regiane Yamanari wrote in a report. Equity investors should follow their lead and increase their exposure to France, they said.

Thursday’s French bond sale, the second since President Emmanuel Macron called for an early vote, went ahead smoothly, a further sign that concerns about the country’s fiscal risks are easing.The gap between French and German 10-year bond yields narrowed to 68 basis points from a peak of 86 basis points last week.

“Markets are clearly more relaxed about political risk in France,” said St James’s Onuekwusi. “People seem to be seeing value in the French market as Macron and the left-wing coalition should work together to prevent a split in the vote. That’s good for the second round and good for the bond market.”

Returning to the US interest rate front, minutes from the Fed’s June policy meeting showed officials were divided on how long to keep borrowing costs high as they await evidence that inflation is subsiding. As investors wait to gauge the direction of interest rates, the next major data point will be the US employment report on Friday. Economists expect nonfarm payrolls to rise by 190,000 in June, lower than the previous month, and the unemployment rate to remain at 4%.

Meanwhile, traders are tracking speculation that President Joe Biden might not seek reelection after last week’s disastrous debate with President Donald Trump raised concerns that the 81-year-old Democrat may be too old to serve any more terms. Wall Street has begun moving money among assets that would be affected by a Trump victory in November.

“The U.K. and French elections will likely remain a passing concern for markets,” Adrian Zuker, chief investment officer at UBS AG Private Banking, told Bloomberg Radio. “Trump is a different story, especially in the context of the trade war. We’ll have to wait and see how aggressive he gets on tariffs, but that may have an impact on markets for a little longer,” Zuker said.

Bitcoin fell for a third straight day, with traders pointing to turmoil surrounding Biden’s presidential nomination and a possible government token sale as the biggest cryptocurrency losers.

In commodity markets, crude oil slid from a two-month high as traders assessed lower U.S. crude inventory data and the severity of Hurricane Beryl. Iron ore futures rose to their highest in nearly a month on optimism about improving demand from China.

Major events this week:

UK general election on Thursday
US Independence Day holiday, Thursday
Eurozone retail sales on Friday
US jobs report, Friday
Fed President John Williams to speak Friday

Some of the key market developments:

stock

S&P 500 futures were little changed as of 3:18 p.m. New York time.
Dow Jones Industrial Average futures up 0.1%
The MSCI World Index rose 0.2% to a record high.
Nasdaq 100 futures fell 0.1%
The MSCI Asia Pacific index rose 1.2% to its highest in more than two years.
The MSCI Emerging Markets Index rose 1.1% to its highest level in more than two years.
Ibovespa Brazil’s Sao Paulo Stock Exchange Index rose 0.5%
S&P/BMV IPC down 0.2%