Gold Prices Rise as Asian Stocks Sink, Fed Rate Cut Bets Decrease and Macron Calls Snap Election in France

Singapore – Asian stocks experienced a decline on Monday as traders scaled back expectations for Federal Reserve rate cuts due to a strong U.S. labor market. Concerns surrounding a snap election call in France also contributed to the market’s unease, putting pressure on the euro.

Trading activity in Asia was subdued as Australia, China, Hong Kong, and Taiwan observed public holidays. Despite this, MSCI’s broadest index of Asia-Pacific shares outside Japan dropped by 0.33%.

U.S. futures saw a slight uptick, with S&P 500 futures and Nasdaq futures each increasing by about 0.03%, bouncing back from minor losses earlier in the session. The dollar gained strength, while U.S. Treasury yields remained high.

The pullback in the global risk rally followed the release of Friday’s nonfarm payrolls report, which revealed stronger-than-expected job creation in May and a resurgence in annual wage growth, highlighting the robustness of the labor market.

Current futures indicate approximately 36 basis points worth of cuts priced in for the Fed, down from 50 bps the previous week. The likelihood of a rate reduction cycle starting in September has also diminished.

These developments precede the Fed’s upcoming policy decision later in the week, with U.S. inflation data for May scheduled for release just before the meeting.

In France, President Emmanuel Macron’s announcement of snap legislative elections following a disappointing performance in the European Union vote stirred political uncertainty and sent the euro tumbling to a one-month low. This move by Macron could potentially shift the political landscape in France and impact Europe’s future direction.

The yen declined against the dollar, while Japan’s Nikkei saw an increase, aided by a weaker yen. The Bank of Japan is also set to convene for a two-day monetary policy meeting, where it may provide updates on its bond purchasing plans.

With ongoing geopolitical events impacting the market, including the situation in France and the upcoming Fed decision, investors are closely monitoring developments to gauge the potential impact on global markets. Oil prices saw slight gains, buoyed by expectations of increased fuel demand in the summer, though gains were limited by a stronger dollar.

Overall, the market remains cautious as traders navigate through a mix of economic data, political uncertainties, and central bank decisions that will shape market sentiment in the coming days.