French Leftist Alliance Gains Edge in Parliamentary Elections

Polling agencies indicate that the French leftist New Popular Front alliance won the most seats in the parliamentary elections, with Macron's centrist alliance and Le Pen's National Rally trailing behind. The euro fell 0.1% to $1.0826, and French bond futures dipped slightly as markets reacted to the election results. US equity futures rose on growing expectations of a Federal Reserve rate cut in September following the latest payrolls report.

Equities

The FTSE 100 fell 0.5% as UK stocks reacted to Keir Starmer's Labour Party securing a landslide victory, ending 14 years of Conservative rule. The blue-chip index's decline came despite gains in the homebuilding sector, with companies like Persimmon, Taylor Wimpey, Vistry, and Barratt seeing their shares rise between 2.2% and 3.4%. This uptick was driven by Starmer's pledge to build 1.5 million new homes over the next five years. The yield on 10-year British government bonds dropped to 4.129%, adding to positive sentiment.

In contrast, the mid-cap FTSE 250 index gained 0.9%, approaching the 21,000 mark and achieving its best week since January 22. Investors are optimistic about the Labour government's potential to boost the UK economy, particularly benefiting domestic-focused companies. The index touched a two-year high, with significant contributions from the construction sector, which rose 3.1%.

On Wall Street, the S&P 500 and Nasdaq hit new closing highs, bolstered by strong performances in communication services, consumer staples, consumer discretionary, and healthcare stocks. The S&P 500 rose 0.54% to 5,567.19, and the Nasdaq climbed 0.90% to 18,352.76. The Dow Jones Industrial Average also saw a modest increase of 0.17% to 39,375.87.

In the US, job growth in June slowed but remained healthy, with the unemployment rate rising to 4.1%. This has led to speculation that the Federal Reserve might cut interest rates, further influencing market movements. Benchmark 10-year Treasury yields fell 6.9 basis points to 4.278%, reflecting these expectations.

Forex & Commodities

The US dollar index remained lower following a Labour Department report showing slower job growth in June and a slight rise in the unemployment rate to 4.1%. Nonfarm payrolls increased by 206,000 jobs last month, with May's figures revised down to 218,000 from the previously reported 272,000. The dollar index, which measures the greenback against a basket of currencies, fell 0.28% to 104.87, hitting a three-week low earlier in the day. Against the yen, the dollar weakened 0.34% to 160.73.

Sterling rose 0.46% to $1.2814 following the Labour Party's landslide election victory in the UK, boosting investor confidence. The euro climbed 0.23% to $1.0835, marking its biggest weekly gain of the year, as France prepared for potentially significant parliamentary elections.

Bitcoin saw its largest weekly decline in nearly a year, dropping 8% to $53,523 amid concerns over the potential liquidation of tokens from the defunct Mt. Gox exchange. It was last down 3.08% at $56,530. Ethereum also fell 4.81% to $2,991.8.

Gold prices slipped as investors took profits after recent gains. Spot gold decreased 0.4% to $2,382.17 per ounce, while US gold futures eased 0.3% to $2,391.10. This came after gold hit a one-month high, driven by rising bets on a US interest rate cut in September.

Oil prices dipped as discussions about a ceasefire in Gaza reduced geopolitical tensions. Brent crude futures fell 0.1% to $86.42 a barrel, and US West Texas Intermediate crude dropped 0.3% to $82.88 a barrel. Investors are also monitoring potential disruptions from Tropical Storm Beryl, which could impact US energy supplies.