EMEA Morning Briefing : Stock Futures, Euro Rise After French Vote

MARKET WRAPS

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Manufacturing PMI for eurozone, Germany, France, Italy, UK; CPI data for Germany, Bavaria, North Rhine Westphalia, Saxony, Brandenburg, Hesse, Baden-Wuerttemberg; UK Nationwide house price index, money and credit; no major corporate trading updates expected

Opening Call:

European stock futures gained early Monday as investors digested the results of the French vote. Asian stock benchmarks largely rose; the euro strengthened; while oil futures rose and gold edged lower.

Equities:

Stock futures pushed higher early Monday, as investors digested projections showing that Marine Le Pen's National Rally notched a victory in the first round of parliamentary elections across France on Sunday.

A projection by polling firm Elabe said National Rally and its allies won 33% of first-round votes while the New Popular Front, a coalition of leftist parties, garnered 29% of ballots. President Emmanuel Macron's pro-business party and its allies were heading for a third-place finish with 22% of the vote, Elabe said.

The surprise was the high turnout, which could make the results of the second round harder to predict, and uncertainty about the economic and fiscal outlook remain high, Capital Economics said.

Political stabilization in France seems unlikely, following the first round of the country's elections, Citi said, citing two possible scenarios. Both scenarios look almost equally probable--that of an outright majority for the far right, or that of a deadlocked parliament.

France will likely stay politically unstable after the election, with very limited policy visibility and a significant loss of influence in Europe, at a critical time for the continent, Citi added.

Forex:

The euro climbed early Monday. EUR/USD's major driver this week is likely to be polls for the second round of France's election to be held on July 7, once today's knee-jerk reaction to the results of the election's first-round fades, CBA said.

EUR's reaction to the first round of the elections is expected to be relatively muted, given the outcome is in line with the polls, CBA added. Provisional results of the election's first round suggest the right-wing coalition led by National Rally performed well, broadly in line with the polls.

Bonds:

The French election has the potential to reshape France's economic and fiscal landscape, said Kiwibank. An absolute majority of the National Front will likely see public borrowing swell, it added. The party's manifesto entails a high-spending economic program including tax cuts for businesses and households.

For financial markets, the risk premium on French debt has become front and center. Last week, the spread on the 10-year French bond over Germany's closed over 80 bps -- the highest since 2012, Kiwibank noted.

Energy:

Oil futures edged higher early Monday, supported by geopolitical tensions in the Middle East and between Russia and the U.S. Crude-oil markets have recently moved higher, with most of the major movements being driven by ebb and flow of geopolitical risk premium, said Saxo Bank.

Saxo maintains a constructive view on oil demand into 3Q amid strong summer demand for fuel toward mobility and cooling.

Metals:

Gold fell slightly in Asia as investors await more clues on the Fed's monetary policy path. The precious metal has been trading in a tight range of $2,300/oz to $2,335/oz, ANZ said.

Clarity on timing for Fed cuts will be crucial for investors when they are taking positions for gold, ANZ added.

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Copper fell, pressured by weak demand and improved mine supply, ANZ said. Chile, a major copper producer, saw its copper production increase 8% on year to 444,000 tons in May, the highest this year. Expansion at the Quebrada Blanca mine and improvements at Escondida support further growth, ANZ added.

TODAY'S TOP HEADLINES

Far Right Wins First Round of French Parliamentary Elections

PARIS-Marine Le Pen's National Rally notched a victory in the first round of parliamentary elections across France on Sunday, according to projections that showed her far-right party moving one step closer to its goal of winning control of the National Assembly and taking the reins of government.

A projection by polling firm Elabe said National Rally and its allies won 33% of first-round votes while the New Popular Front, a coalition of leftist parties, garnered 29% of ballots. President Emmanuel Macron's pro-business party and its allies were heading for a third-place finish with 22% of the vote, Elabe said.

No Nvidia in Your Portfolio? 'You're Just Toast'

In this year's bull market, there are artificial-intelligence plays like Nvidia-and then there's everything else. As the second half of the year begins, investors are wondering whether something has to give.

Enthusiasm for the chip maker, whose products are seen as essential to powering AI technology, kept building through the second quarter. Nvidia reported sales and profits in May that blew past Wall Street expectations for the fifth consecutive quarter. The stock rose 37% in the second quarter and is up 149% for the year.

Even a Slowly Cooling Labor Market Often Ends With a Recession

The pandemic left the U.S. labor market badly overheated. Reopening businesses panicked at labor shortages, paying big raises to hire. As prices shot higher, fears rose of a wage-price spiral.

Recently, though, the labor market has cooled, and indeed, looks like something close to normal. Unemployment has crept up from a half-century low of 3.4% a year ago to 4% in May, consistent with what economists consider full employment. The Labor Department releases June data Friday.

VC-Backed IPOs Had a Tepid First Half, Squeezing Venture Capital More

Hopes for a resurgence of venture-backed initial public offerings at the start of the year are petering out, prolonging a drought in exits for venture-capital firms.

One reason is the cool reaction in public markets to debut stocks, which is making other aspirants less interested in going out.

Fed's interest-rate policy is working, just taking longer than everyone would want, Daly says

Federal Reserve interest-rate policy is working to lower inflation but maybe not as quickly as consumers would hope for, San Francisco Fed President Mary Daly said Friday.

"It is really challenging to look anywhere and not see monetary policy working," Daly said, in an interview on CNBC.

For Ukraine and Russia, a Deadly Summer Lies Ahead With Little Hope of Big Gains

KHARKIV, Ukraine-As Russia's invasion of Ukraine enters a third summer, the 700-mile front line is the site of a bloody chess match, with each side moving pieces around in search of an advantage without conceding ground elsewhere.

Ukraine's army, which recently blunted a dangerous Russian offensive that ran short on troops, is counterattacking in villages on its northeastern border.

Tech Industry Wants to Lock Up Nuclear Power for AI

Tech companies scouring the country for electricity supplies have zeroed in on a key target: America's nuclear-power plants.

The owners of roughly a third of U.S. nuclear-power plants are in talks with tech companies to provide electricity to new data centers needed to meet the demands of an artificial-intelligence boom.

BlackRock to Acquire Data Provider Preqin for $3.22 Billion

BlackRock, the world's largest asset management firm, plans to acquire U.K. data provider Preqin to bolster its data capabilities.

The New York-based company has agreed to acquire private-markets data provider Preqin for 2.55 billion British pounds, or $3.22 billion, in cash, it said Sunday in a statement. The deal is expected to close before year-end.

Amazon, Built by Retail, Invests in Its AI Future

Amazon built a $2 trillion company through years of aggressive spending on its retail and logistics businesses. Its future gains will likely be determined by the billions designated to fund its artificial-intelligence push.

Amazon is planning to spend more than $100 billion over the next decade on data centers, an impressive level of investment even for a company known for its spending ways. The Seattle company is now devoting more investment money to its cloud computing and AI infrastructure than to its sprawling network of e-commerce warehouses.

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Expected Major Events for Monday

00:01/IRL: Jun Ireland Manufacturing PMI

04:30/NED: May Retail turnover

05:00/NED: Jun Netherlands Manufacturing PMI

06:00/UK: Jun Nationwide House Price Index

06:30/SWI: May Retail Sales

07:00/CZE: 1Q LFSS Employment & Unemployment

07:00/POL: Jun Poland Manufacturing PMI

07:00/TUR: Jun Turkey Manufacturing PMI

07:15/SPN: Jun Spain Manufacturing PMI

07:30/CZE: Jun Czech Republic Manufacturing PMI

07:30/SWI: Jun procure.ch Purchasing Managers' Index

07:45/ITA: Jun Italy Manufacturing PMI

07:50/FRA: Jun France Manufacturing PMI

07:55/GER: Jun Germany Manufacturing PMI

08:00/GER: Jun Bavaria CPI

08:00/GER: Jun North Rhine Westphalia CPI

08:00/GER: Jun Saxony CPI

08:00/GER: Jun Brandenburg CPI

08:00/GER: Jun Hesse CPI

08:00/GER: Jun Baden-Wuerttemberg CPI

08:00/EU: Jun Eurozone Manufacturing PMI

08:00/GRE: Jun Greece Manufacturing PMI

08:30/UK: May Monetary & Financial Statistics

08:30/UK: May Bank of England effective interest rates

08:30/UK: May Money and Credit - Lending to Individuals, Lending to Businesses, Broad Money and Credit

08:30/UK: Jun S&P Global UK Manufacturing PMI

09:00/GRE: May Labour Force Survey

09:00/CYP: May Retail trade

12:00/GER: Jun Provisional CPI

16:59/AUT: Jun Unemployment figures

23:01/UK: Jun Shop Price Index

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07-01-24 0016ET