SYDNEY- Asian stocks inched higher on Monday as investors grew more confident about a September US rate cut, while the euro grappled with political uncertainty as French elections pointed to a hung parliament.
In France, a leftist alliance unexpectedly took top spot ahead of the far right, a major upset that was set to prevent Marine Le Pen’s National Rally (RN) from running the government.
The loss of the far right was something of a relief for investors, though they also have concerns the left’s plans could unwind many of President Emmanuel Macron’s pro-market reforms.
“It will be difficult for France to form a government and as the most likely potential outcome is now some arrangement between parts of the left and Macron,” said Holger Schmiedling, chief economist at Berenberg.
“This could mean some reform reversals rather than further reforms. The outcome I would say is less bad than could have been the case. It could have been much worse.”
The single currency dipped a fraction in reaction to $1.0828 having been as high as $1.0843 on Friday when a soft US jobs report undermined the dollar.
The euro was also down 0.25 percent on the Swiss franc at 0.9680 francs but held firm on the yen at 174.00 The dollar stood at 160.70 yen just off its recent top of 161.86.
EUROSTOXX 50 futures and FTSE futures both edged 0.1 percent higher. French 10-year bond futures dipped 23 ticks, or a modest 0.21 percent .
Equities were supported by hopes that a US policy easing was getting closer. MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.1 percent , after reaching a two-year top last week.
Japan’s Nikkei held steady near record highs. Chinese blue-chip index eased 0.6 percent , while bond yields rose as the central bank launched new money market operations.
S&P 500 futures and Nasdaq futures were both nearly flat. Earnings season kicks off later this week when Citigroup JP Morgan and Well Fargo all report.
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 percent chance of a move.
