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Stock markets diverge as traders evaluate Fed rate cut plans

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Traders are this week awaiting a US retail sales report, inflation numbers and central bank rate decisions

Stock markets diverged Monday with traders evaluating the Fed’s plans for interest-rate cuts and Europe’s political landscape before looming general elections.

As US inflation takes longer to cool than expected, the Federal Reserve has indicated one rate cut this year.

Traders are this week awaiting a US retail sales report, inflation numbers and central bank rate decisions.

Elsewhere in Europe, there are concerns about the upcoming polls in France, which President Emmanuel Macron called after his party lost out to the far-right National Rally (RN) in EU-wide elections a week ago.

The move has fanned concerns about instability in Europe’s second-largest economy, and observers said France could be on course for a standoff with the European Union if extremists win.

Uncertainty over the extent to which the far right RN party will have effective control of the next French parliament after July 7 will be an ongoing source of market angst, according to Ray Attrill at National Australia Bank.

Concerns about the election hammered Paris’ CAC 40 index last week, pushing it down more than 2% on Friday, which weighed on other European bourses.

Paris trading was largely steadier Monday, however, as was the case in Frankfurt and London, while the euro firmed.

In Asia, Tokyo closed down nearly 2% as investors took a risk-averse stance and the latest data fuelled concerns about the US economy.

Investors sold down Tokyo shares on worries about French politics, concerns about the US economy and uncertainty over the BoJ’s policy outlook, according to analysts.

“Investors are conscious of slowdown concerns surrounding the US economy” following data last week showing a decline in consumer sentiment, noted IwaiCosmo Securities.

Political uncertainty in Europe was also shrinking investors’ spirit, the brokerage added.

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