CAC underperforms in lead up to the French election

European stocks are set for firmer open on Friday after a roughly flat finish on Wall Street, although stocks are broadly set to fall across the week.

•         Chinese tech under pressure as Tencent Holdings shuts its streaming gaming service
•         French election nerves see CAC underperform this week and EURUSD fall for a 7th day
•         Canadian jobs report is expected to show strong job creation ahead of BoC meeting next week

Europe is managing to brush off concerns in China, where COVID cases continue to spread rapidly. The ongoing lockdown has sparked little panic in the stock markets amid bets that the promised stimulus will outweigh the negative impact of the COVID outbreak.

Instead, Chinese tech stocks were under pressure as Tencent Holdings closed its streaming gaming service, hitting sentiment in the sector, which is already suffering amid ongoing regulatory crackdowns. The Hang Seng trades lower for a third straight session.

In Europe, stocks point to a stronger start, paring losses from the previous session. However, the picture across the week shows the FTSE outperforming its peers and is set to rise 0.1%. Meanwhile, the DAX is trading over 2% lower across the week, but the French CAC has underperformed its European peers as it heads for around 3.3% losses this week.

French elections

Weakness in the CAC and EUR/USD trading lower for a 7th straight session reflects nerves becoming apparent ahead of Sunday’s first-round French Presidential elections. The runoff is then held two weeks later, on Sunday 24th of April. No candidate has ever secured the 50% vote required to win the first round straight out.

While Macron is still the favorite, far-right Marine Le Pen, who Macron defeated in 2017, has closed the gap in the polls sufficiently this week to unnerve the markets. In 2017 Macron beat Le Pen by 66% to 34%. Currently, the polls sit at 53% to 47%, a significantly tighter race. Le Pen has in the past been very vocal about her desire to leave the euro. This time around, she has rebranded herself, focusing on the economic problems, of which there are plenty, with inflation at a record high of 5.1%.

Even so, the euro is nervous about the prospect of a Le Pen win later in the month. Despite more hawkish ECB minutes yesterday, 1.09 failed to hold, and EUR/USD looks to be targeting the 2022 low.

Canadian jobs report

The economic calendar today in Europe is relatively quiet. Looking ahead, the Canadian jobs data will be in focus. Expectations are for 80,000 jobs in March after 336,000 were added in February. The unemployment rate is also expected to fall to 5.4%, down from 5.5% in the previous month. Strong job creation and rising wages are likely to support the loonie ahead of next week’s BoC interest rate decision.

USDCAD rebounded from 1.24 and ran into resistance at 1.26 the 200 DMA, a three-week high. The pair is edging lower ahead of the release. A break below the 20 DMA at 1.2570 could lead to further downside.