Premarket: French political deadlock, dour Asia close take shine off world stocks

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World stocks held just below record highs on Monday, with sentiment slightly cautious as growth woes in China and the prospect of political deadlock in France took the shine off optimism about a U.S. interest rate cut as early as September.

Mainland China and Hong Kong stocks ended lower, with a key index logging its fifth straight losing session. Investors were disappointed by a lack of policy stimulus measures amid a weak economic recovery, rising geopolitical tensions and foreign outflows. “Market uncertainty has somewhat decreased following the election, as the prospects for significant increases in public spending are low, given that neither left-wing nor far-right parties secured an absolute majority,” said Bruno Schneller, managing director at Erlen Capital Management.

The euro was up 0.2 per cent against the yen at 174.54. The dollar stood at 161.04 yen, just off its recent top of 161.86. Investors took Friday’s jobs report as adding to the case for a September rate cut from the Federal Reserve, with futures now implying a 77 per cent chance of a move.“Three-month payroll growth fell sharply to +177k from +249k as previously reported, driven by 111k of downward revisions,” wrote analysts at Goldman Sachs.

Fed Chair Jerome Powell will have a chance to offer his outlook when he appears before Congress on Tuesday and Wednesday, while several other Fed officials are speaking this week.

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