Asian stocks fell on Monday, with French shares also falling, after Sunday’s election gave no party a majority in the National Assembly and a left-wing coalition the most seats.
HONG KONG — Asian stocks fell on Monday, including French shares, after Sunday’s election gave no party a majority in the National Assembly and a left-wing coalition won the most seats.
The CAC-40 index of large companies was down 0.4% at 7,643.03 in early trading on Monday.
Analysts say the market’s biggest fear was that either the left-wing National Front or Marine Le Pen’s anti-immigration National Rally would win a majority. Both parties have pledged to boost spending, raising concerns that France’s already huge budget deficit could balloon. That has already sparked a sell-off in French government bonds.
While that outcome was averted, France faces uncertainty over the coming weeks after Prime Minister Gabriel Attal announced his resignation. None of the major political forces in Parliament will have a clear majority to back a new government, making it likely that the new administration will have a hard time passing legislation or making tough spending choices to prevent the national debt and deficit from getting out of hand.
“The fact that the left has become the strongest group in parliament raises serious concerns,” said Holger Schmieding, chief economist at Berenberg Bank. “France is heading into a period of political uncertainty, possibly heading towards fiscal challenges and the reversal of some of President Emmanuel Macron’s pro-growth reforms.”
The euro fell to $1.0819 from $1.0836 on Monday.
U.S. stocks rose to a record high on Friday, boosted by a much-anticipated job market report, while U.S. futures and oil prices fell.
In Tokyo, official data showed real wages fell 1.4% in May from a year earlier, the 26th consecutive month of declines, while the Nikkei stock average fell 0.3% to 40,780.70 as a weaker yen and rising raw material prices pushed up import costs. Nominal wages rose 1.9%.
Hong Kong’s Hang Seng Index fell 1.8% to 17,484.93, while the Shanghai Composite Index fell 0.7% to 2,928.08.
Australia’s S&P/ASX 200 fell 0.8% to 7,763.20, while South Korea’s KOSPI fell 0.1% to 2,859.20.
On Friday, the S&P 500 rose 0.5% to 5,567.19, its third straight day of record highs following Thursday’s Independence Day holiday break. The index has already set 34 records this year and is up nearly 17%, but is still just over halfway there.
The Dow Jones Industrial Average rose 0.2%, to 39,375.87, and the Nasdaq Composite added 0.9%, to 18,352.76.
In the bond market, the move was more decisive. Treasury yields fell following the U.S. employment report. Companies hired more workers last month than economists expected, but the job gains still slowed from May’s. Moreover, the unemployment rate unexpectedly rose, worker wage growth slowed, and the U.S. government said last month’s employment numbers were lower than previously indicated.
Overall, the data reinforced Wall Street’s view that U.S. economic growth is slowing under the weight of high interest rates — just what investors are hoping would tame inflation and encourage the Federal Reserve to start cutting its key interest rate from its highest level in two decades.
For financial markets, the clearest takeaway from the jobs report is that the Fed is maintaining its outlook for a cut in its key interest rate later this year, likely in September and possibly as soon as December.The yield on the two-year Treasury note, which tracks closely with expectations of Fed action, fell to 4.60% from 4.71% late Wednesday.
The yield on the 10-year Treasury note, the backbone of the bond market, fell to 4.27% at Wednesday’s close, down from 4.36% and 4.70% in April, a notable move for the bond market and one that has helped support stocks.
In other trading on Monday, benchmark U.S. crude oil fell 44 cents to $82.72 a barrel in electronic trading on the New York Mercantile Exchange.
Brent crude, the international standard, fell 42 cents to $86.12 a barrel.
The U.S. dollar rose to 160.75 yen from 160.72 yen.
