"This is quite evident by simply looking at EUR/USD, which is still trading below 1.09 despite the result of the first round of the French presidential election."
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Uncertainty over the French presidential election could put modest pressure on the euro ahead of the second round of votes on April 24, MUFG Bank said.
The first round of the election and opinion polls suggest a close result in the second round, which could weigh on the euro slightly in coming weeks, MUFG currency analyst Lee Hardman said in a note.
"There is a risk that the euro could weaken further in the near-term if the opinion polls were to continue to narrow ahead of the second round."
However, President Emmanuel Macron should ultimately prevail, albeit less comfortably than the last election, meaning the euro's weakness on nervousness over the election outcome won't last, Hardman said.
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Cryptocurrencies were lower, in line with stocks. Bitcoin prices lost more than 1% over the past 24 hours and were holding above $42,000; the leading digital asset was trading above $45,000 less than a week ago. Smaller peer ether lost almost 3% to around $3,150.
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The Riksbank is likely to take a less expansionary policy approach at its April 28 meeting, but this is widely anticipated so any gains in the Swedish krona will be limited, Commerzbank said.
The market has brought forward its interest rate rise expectations in recent weeks following remarks from Riksbank policymakers suggesting the central bank could start lifting rates sooner, Commerzbank currency analyst Antje Praefcke said in a research note.
"That is why EUR/SEK is trading at 10.30 levels," she said. "At the same time SEK does not have much further appreciation potential at this stage, " she said.
Bonds:
U.S. government bonds extended their selloff. The yield on 10-year Treasury notes rose to 2.758% from 2.713% Friday. Yields have climbed for four of the past five weeks.
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The yield on 10-year benchmark U.K. government bonds jumped after official data showed the country's output almost flattened in February.
The 10-year gilt yield rose as high as 1.795% after the announcement, from Friday's close of 1.760%, according to Tradeweb. U.K. gross domestic product expanded 0.1% in February compared to the previous month, missing expectations by economist polled by the WSJ of a 0.2% rise.
"It's little wonder the economy overall is showing signs of stalling from its remarkable pandemic recovery, given the sense of foreboding which arose from mid-February as troops amassed on the Ukraine border and then the commodity shock unleashed by the invasion hit sentiment," said Susannah Streeter at Hargreaves Lansdown.
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The outcome of the first round of French presidential elections seems slightly positive, DZ Bank analyst Christian Lenk said, though he sees scope for limited outperformance of French government bonds, or OATs.
Incumbent President Emmanuel Macron secured a lead over Marine Le Pen in the first round of elections on Sunday, but the runoff is expected to be a tight race.
In case of a surprise win by Le Pen in the runoff, a rise in the 10-year OAT-Bund spread to around 80 basis points--from around 51 bps currently, according to Tradeweb--would be quite conceivable, Lenk said. Early Monday, 10-year OATs slightly outperformed 10-year Bunds.
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Euro credit investors are set to pay special attention to second-quarter company financial reports, as the earnings season kicks off this week, said UniCredit's research team.
"We expect generally improved credit metrics to be confirmed, though amid the ongoing crisis in Ukraine investors will be focusing on the outlook, and notably on how issuers plan to cope with rising commodity and energy prices," analysts at the Italian bank said.
Amid slower economic growth in 1Q, they expect the credit metrics of cyclical companies are likely to have deteriorated slightly more than those of non-cyclical firms.
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Euro credit investors are likely to remain vigilant as the week starts, UniCredit's research team said, as the investment environment remains vulnerable.
"European corporate credit faces a mix of input that will probably leave investors cautious at the start of the new week," analysts at the Italian bank said.
Beside the weakness in major equity indexes and in Bund futures this morning, "nervousness is likely to dominate" ahead of U.S. inflation data Tuesday and a European Central Bank meeting on Thursday, they said. Also, the French presidential election will be decided in two weeks in a second round, adding to current uncertainty.
Commodities:
Oil prices slipped as fears of waning demand in China from surging Covid-19 cases weigh. Cases of Covid-19 in Shanghai have surged to 130,000 raising fears that the lockdown of the city of 25 million people could continue.
"The lockdowns that are slowing oil demand in the world's second-largest consumer country threaten to persist for even longer," said Commerzbank.
The setback to oil demand from canceled flights and movement restrictions could stand at 1.2 to 1.3 million barrels per day, Commerzbank said, citing data from consultancy FGE.
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Second-quarter earnings results bode well for oil and gas and basic resources issuers, said UniCredit's research team. "Oil & Gas and Basic Resources issuers are likely to have benefited further from commodity prices, which were already high in 1Q," they said.
On the flipside, sectors particularly exposed to discretionary spending, such as retail and travel & leisure, are likely to have witnessed further deterioration of their credit metrics due to the decline in real household income, they said.
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Base-metal prices sunk as worries over Chinese consumption mount, particularly in key industrial regions such as Shanghai, which last week pushed the city's 26 million residents into a coronavirus lockdown.
Three-month nickel on the London Metals Exchange was down 3.3% to $32,855 a metric ton, while copper and aluminum futures were down 1.1% and 2.3%, respectively.
Investors' worries over Asian appetite for metals have so far outweighed the supply issues coming from Russia. Last week, miner Rio Tinto relinquished Russian giant Rusal's share of the Gladstone refinery in Queensland--something which was seen as a key source of raw material for Rusal and again could strain supply from the region.
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Precious-metal prices rise as investors look to haven assets, on mounting fears of inflation globally. Gold futures were up 0.1% in New York, with investors seeing the metal as a strong hedge, especially given the effects of the war in Ukraine on consumer prices already.
Elsewhere, platinum group metal prices are also rising, particularly for palladium which is 2.8% higher at $2,487 an ounce, having risen more than 8% on Friday after the London Platinum and Palladium Market removed two Russian-government tied refiners from its permitted list of goods delivery list.
Platinum too was 0.9% higher at $984 an ounce.
EMEA HEADLINES
Société Générale Sells Russian Bank to Oligarch Vladimir Potanin
French banking giant Société Générale SA said it would exit Russia, sell its operations to one of Russia's richest people, and take a more than $3 billion hit to its income.
The French bank said Monday that it was selling its entire stake in Rosbank and its Russian insurance units to Interros, a conglomerate controlled by metals billionaire Vladimir Potanin. Interros previously controlled Rosbank.
UK Economy Grew Marginally in February
The U.K. economy almost flatlined in February, and economists see tougher times ahead as effects from the Ukraine war feed into a multi-decade high inflation rate.
The U.K. economy expanded 0.1% in February compared with the previous month, the Office for National Statistics said Monday, slightly below the 0.2% rise expected by economists in a poll carried out by The Wall Street Journal.
Miners Choose Dividends Over Investments Despite Production Strain
High commodity prices are boosting mining profits, and companies are opting to give the money back to shareholders rather than invest in new projects-which could slow global production growth.
Last year was spectacular for mining groups as they benefited from a postpandemic recovery in demand which boosted the prices of commodities such as coal, iron ore, aluminum and copper. Earnings soared as a result, and much of it went into shareholders' pockets.
Ericsson Suspends Russia Business Indefinitely, Books $95 Mln Provision
STOCKHOLM-Swedish telecommunications company Ericsson AB said Monday that it is suspending its business in Russia indefinitely and will record a provision of 900 million Swedish kronor ($95.2 million) in the first quarter of 2022.
In late February, Ericsson suspended all deliveries to customers in Russia to give it time to analyze the potential impact of sanctions against the country.
Russia's Rusal Disagrees With Rio Tinto Alumina Refinery Step-In
United Co. Rusal said that it disagrees with Rio Tinto PLC taking full control of Queensland Alumina Ltd., one of Australia's largest alumina refineries in which the Russian company has a 20% stake, and that talks with its partner about management of the operation are continuing.
Rio Tinto, the world's second-largest miner by market value, last week said it had taken on "100% of the capacity and governance" of the QAL refinery after sanctions from the Australian government aimed at gumming up Russia's mammoth aluminum industry.
Ukraine, Russia Gear Up for War's Biggest Battles
Ukraine and Russia poured reinforcements into eastern Ukraine this weekend, preparing for what are likely to become the war's biggest battles as refugees continued to flee the looming Russian assault.
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04-11-22 0626ET
