SYDNEY- Asian shares slipped on Monday ahead of a week packed with central bank meetings and US inflation data, while the euro eked out a gain on relief the far right did not win the first round of the French presidential elections.
French leader Emmanuel Macron and far right challenger Marine Le Pen qualified on Sunday for what promises to be a tightly fought presidential election runoff on April 24.
A Le Pen victory could send shockwaves through France and Europe in ways similar to Britain’s vote in 2016 to leave the European Union (EU). The first round result was close enough to leave the euro just a tick firmer at $1.0888 after an initial pop up to $1.0950.
The mood in equity markets was cautious, with MSCI’s broadest index of Asia-Pacific shares outside Japan easing 1.0 percent.
Japan’s Nikkei dropped 0.6 percent, having shed 2.6 percent last week, while Chinese blue chips lost 1.8 percent.
S&P 500 stock futures eased 0.4 percent and Nasdaq futures 0.6 percent. EUROSTOXX 50 futures lost 0.4 percent, and FTSE futures 0.3 percent.
Earnings season kicks off this week with JP Morgan, Wells Fargo, Citi, Goldman Sachs and Morgan Stanley all due to report.
Despite the early losses, Wall Street has fared surprisingly well in the face of a vicious selloff in bonds which saw 10-year Treasury yields surge 31 basis points last week to be last at 2.72 percent.
Markets have raced to price in the risk of ever-larger rate hikes from the Federal Reserve with futures implying rises of 50 basis points at both the May and June meetings.
BofA’s US economist Ethan Harris now expects half-point hikes at each of the next three meetings and a cycle peak around 3.25-3.50 percent.
“If inflation looks like it is heading below 3 percent, then our current call should be hawkish enough,” Harris said in a note. “Conversely, if inflation gets stuck above 3 percent then the Fed will need to hike until growth drops close to zero, risking a recession.”
