Asian Stocks Drop on Worries Over Global Risks: Markets Wrap

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(Bloomberg) — Asian stocks fell in early trading as concern over a political crisis in France fanned anxiety in global markets, while a flurry of central bank decisions this week may signal delays to the long-awaited interest-rate easing cycle. 

Equity benchmarks in Japan, South Korea and Australia dropped. Benchmark 10-year Treasuries slipped while US equity futures were little changed in early trading. Gold rallied. French bond futures dropped.

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The flight to haven assets came as risk sentiment turned sour, with a gauge of global stocks falling the most in two weeks as the fallout from France’s snap parliamentary election threatened to spill over into the rest of the European Union. The greenback inched higher and traded around its highest since November. The euro steadied after falling the most in two months last week. 

Traders are “being guided on perceived risk through the aggressive widening of yield premium seen in the French 10-year bond yield over the German 10-year bund,” Chris Weston, head of research at Pepperstone Group in Melbourne, wrote in a note to clients. “The evolving theme in French politics continues to see market players attempting to price risk and uncertainty around the future French fiscal position.” 

A coalition of France’s left-wing parties presented a manifesto to pick apart most of Macron’s seven years of economic reforms and set the country on a collision course with the EU over fiscal policy. Far-right leader Marine Le Pen said she won’t try to push out President Emmanuel Macron if she wins France’s snap parliamentary election, in an appeal to moderates and investors.

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Days after the Federal Reserve pared back projections for US monetary easing this year, policymakers from the UK to Australia are likely to signal this week that they’re still not convinced enough about disinflation to start lowering borrowing costs themselves. Emerging market policy makers, including in Indonesia and Brazil, are also likely to push back on rate cut expectations.

Federal Reserve Bank of Minneapolis President Neel Kashkari at the weekend said the central bank can take its time and watch incoming data before starting to…