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Euro gains, Asian shares steady

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The euro up 0.41%, while European stock futures added 1.4% and French OAT bond futures advanced 0.15% as investors digested the election results

Uncertainty over the U.S. rates outlook kept Asian shares stable on Monday, while the euro gained after the first-round voting in France’s shock snap election was won by the far-right.

The shock vote has unsettled markets as the far-right, as well as the left-wing alliance that came second on Sunday, have pledged big spending increases at a time when France’s high budget deficit has prompted the European Union to recommend disciplinary steps.

On Monday, the euro was up 0.41%, while European stock futures added 1.4% and French OAT bond futures advanced 0.15% as investors digested the election results.

There is a sense of relief that the first round of the French elections were not as comprehensively in Le Pen’s favour as the polls suggested, said Tony Sycamore, market analyst at IG.

He said: This raises hopes that National Rally won’t win an outright majority, nor be in a position to open the purse strings, a proposition which had the French bond market and the euro looking nervously over their shoulders.

Exit polls showed Marine Le Pen’s National Rally (RN) winning nearly 34% of the vote, comfortably ahead of leftist and centrist rivals.

Investors are concerned that if the far-right National Rally party wins a majority, this could set the stage for France to clash with the European Union, which could disrupt Europe’s markets and the euro sharply, according to Vasu Menon, MD of investment strategy at OCBC.

In Asia, the MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.04%, in a subdued start to the second half of the year having increased 7% so far this year.

China stocks were mixed, with blue-stocks 0.19% lower and the Shanghai Composite index 0.31% higher following a mixed set of data.

Factory activity among smaller Chinese manufacturers grew at the fastest pace since 2021 due to overseas orders, while weak domestic demand and trade frictions had led to another industrial sector contraction.

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