Moves were mostly modest, with MSCI’s broadest index of Asia-Pacific shares outside Japan slipping 0.5% in thin trade
Asian stocks were in a guarded mood on Tuesday as investors pondered fresh political uncertainty in European markets after right-wing gains in elections and a snap poll in France revived concerns about the cohesion of the bloc.
Moves were mostly modest, with MSCI’s broadest index of Asia-Pacific shares outside Japan slipping 0.5% in thin trade. Chinese blue chips dropped 1.2%, having been shut on Monday, while the yuan reached a seven-month low.
Going the other way, Japan’s Nikkei firmed 0.3% and South Korea stocks gained 0.4%.
EUROSTOXX 50 futures also rose 0.2%, steadying after Monday’s decline, while FTSE futures were flat.
The euro, French stocks and government debt had been shaken after investors evaluated whether the right wing can repeat their success in French elections and how much sway far-right parties can have on the new EU executive.
Bond yields gained across Europe, with the spread between French and German debt widening considerably, after an opinion poll indicated the far-right National Rally could win the snap election, although without a clear majority.
France’s opposition left-wing parties late on Monday pledged to work together and nominate joint candidates.
Elsewhere, markets gave a muted reaction to Apple’s long-awaited AI strategy, which integrates “Apple Intelligence” technology across a suite of apps. The iPhone maker’s shares were 0.3% lower in after hours trade, having dipped 1.9% in normal hours.
S&P 500 futures and Nasdaq futures both shed 0.1% in Asian trading, after gaining on Monday.
The market has, so far, proven remarkably resilient to the rise in U.S. yields that followed Friday’s jobs report and the pull back in expectations for Fed rate cuts.
We see diminished prospects for easing this year, and now expect the first Fed cut only in November, JPMorgan analysts said.
Equities seem to be ignoring the range of risks, including politics, geopolitics, the narrow market concentration and the surge in meme stock and crypto trading that may signal froth, the analysts said. As such, we maintain a defensive tilt in our model portfolio.
