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(Bloomberg) — European stocks edged higher as traders digested the unexpected result of France’s snap election, which leaves the left-wing grouping without enough seats to form a government. The euro pared a decline along with French bonds.

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The Stoxx Europe 600 benchmark reversed an early decline, while France’s CAC 40 Index erased early losses following the surprise victory by a left-wing coalition in legislative elections.

While France’s New Popular Front — which includes the Socialists — came first in the weekend vote, financial market losses were were tempered by news that no party won the majority needed to govern. The outcome potentially constrains the influence of the left-wing coalition and Marine Le Pen’s National Rally, both of which advocate increased public spending.

“Markets won’t like a far-left government having a say,” said Chris Weston, head of research at Pepperstone Group Ltd. However, the lack of an outright majority for the left means “passing the NFPs manifesto in full will be a real challenge and while uncertainty is high once again, this should contain the fallout,” he said.

Reflecting concerns about rising state expenditure, French government bonds initially underperformed their German peers. Yet in a sign of jitters waning, the spread between the two has begun to narrow. The gap between 10-year French and German yields, a measure of credit risk, sits at around 70 basis points, below levels seen at the height of the market rout last month.

The New Popular Front — which includes the Socialists and far-left France Unbowed — won 178 seats in the National Assembly, according to data compiled by the Interior Ministry. Marine Le Pen’s National Rally, which pollsters last week had seen winning the election, came third with 143, while President Emmanuel Macron’s centrist alliance notched up 156.

US equity futures retreated after last week’s rally on Wall Street, with Federal Reserve Chair Jerome Powell’s congressional testimony and US inflation data among the main events this week. Traders will be looking to the two to solidify bets policy easing may begin as early as September.

Treasury yields ticked higher and the dollar steadied after last week’s decline.

Earnings from major US banks including JPMorgan Chase & Co. are also due this week. In other corporate news, Boeing Co. agreed to plead guilty to criminal conspiracy to defraud the US after the Justice Department concluded the planemaker failed to adhere to an earlier settlement stemming from two crashes of its 737 Max jetliner.

Meanwhile, President Joe Biden’s continues to salvage his embattled reelection bid, fending off calls from Democratic lawmakers to step aside. Biden registered his best showing yet in a Bloomberg News/Morning Consult tracking poll of battleground states, even as voters offered withering appraisals of his debate performance.

Bitcoin fell with other cryptocurrencies due to concern over possible sales of the token by creditors of the failed Mt. Gox exchange. In China, the central bank sought take more control of market interest rates by announcing additional open market operations and tightening the band within which short-term rates can fluctuate.

In commodities, oil edged lower after four straight weekly gains, even as traders tracked twin threats to crude production posed by a hurricane in the US and wildfires in Canada. Gold was steady, and iron ore extended a decline from a one-month high.

Key events this week include:

  • Indian Prime Minister Narendra Modi visits Moscow, Monday

  • Fed Chair Jerome Powell delivers semi-annual testimony to the Senate Banking Committee, Tuesday

  • US Treasury Secretary Janet Yellen testifies to the House Financial Services Committee, Tuesday

  • Fed Vice Chair for Supervision Michael Barr, Governor Michelle Bowman speak, Tuesday

  • China PPI, CPI, Wednesday

  • Japan PPI, Wednesday

  • Fed Chair Jerome Powell testifies to the House Financial Services Committee, Wednesday

  • Chicago Fed President Austan Goolsbee and Fed Governor Michelle Bowman speak, Wednesday

  • BOE chief economist Huw Pill, BOE policy maker Catherine Mann speak, Wednesday

  • US CPI, initial jobless claims, Thursday

  • Atlanta Fed President Raphael Bostic, St. Louis Fed President Alberto Musalem speak

  • Japan industrial production, Friday

  • China trade, Friday

  • US University of Michigan consumer sentiment, PPI, Friday

  • Citigroup, JPMorgan, Wells Fargo and Bank of New York Mellon report quarterly earnings, Friday

Some of the main moves in markets:


  • The Stoxx Europe 600 rose 0.1% as of 8:27 a.m. London time

  • S&P 500 futures fell 0.1%

  • Nasdaq 100 futures fell 0.1%

  • Futures on the Dow Jones Industrial Average fell 0.1%

  • The MSCI Asia Pacific Index fell 0.2%

  • The MSCI Emerging Markets Index rose 0.1%


  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $1.0830

  • The Japanese yen was little changed at 160.82 per dollar

  • The offshore yuan was little changed at 7.2876 per dollar

  • The British pound was little changed at $1.2810


  • Bitcoin fell 2.7% to $55,721.01

  • Ether fell 2.8% to $2,914.12


  • The yield on 10-year Treasuries was little changed at 4.28%

  • Germany’s 10-year yield was little changed at 2.56%

  • Britain’s 10-year yield was little changed at 4.12%


  • Brent crude fell 0.4% to $86.16 a barrel

  • Spot gold fell 0.5% to $2,380.50 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Michael G. Wilson, Matthew Burgess and Michael Msika.

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