A selloff in Europe set the tone for global markets on Monday as France’s decision to call a snap election weighed on everything from the euro to banking stocks and government bonds.
The euro fell to a one-month low against the dollar, European stocks slipped 0.6 per cent, euro zone bank stocks tumbled 2 per cent while government bond yields in France and Italy jumped. French bank Société Générale was last down more than 5 per cent and BNP Paribas more than 4 per cent as investors worried their funding costs may increase if French sovereign borrowing becomes more expensive amid higher spending, bankers said.
Futures now show roughly 36 basis points worth of U.S. rate cuts priced in this year, down from 50 bps last week. The odds for an easing cycle beginning in September have also lengthened. He said that with recent data pointing to a cooling of the economy, the Fed should be able to subtly adjust its message around upcoming rate cuts with a quarter-point cut in the final three months of the year still likely.
Against the dollar, the yen dipped 0.1 per cent to 156.93. The dollar index, which measures the greenback against a basket of six other major currencies, firmed to 105.17.