Stocks fall and dollar strengthens as European political turmoil weakens market sentiment By Reuters

By Lorenzo Blanco

LONDON (Reuters) – stocks fell slowly on Monday as the dollar held near six-week highs as the febrile political environment in France weighed on sentiment, as investors awaited a series of central bank meetings in the region. , as well as new economic data from the United States.

European stocks fell again after sharp losses last week, when French President Emmanuel Macron called early elections in hopes of preventing gains by far-right and left-wing groups against his centrist administration.

The benchmark STOXX index had fallen into negative territory by 1107 GMT, as concerns about the potential fiscal consequences of the French election outweighed gains in technology and banking stocks.

The closely watched spread between German and French government bond yields stabilized in a calmer session, after Macron's bet triggered a flight to safety and pushed the gap to its widest level since 2017.

European Central Bank officials told Reuters they had no plans to launch emergency purchases of French bonds to calm the market.

“A French challenge to the region's fiscal arrangements would be problematic and have far-reaching implications,” JPMorgan analysts warned. “At this point, the situation in the run-up to the first round of voting is still very fluid.”

The central banks of Australia, Norway and the United Kingdom are expected to leave their interest rates unchanged at their meetings this week, although the Swiss National Bank (SNB) could reduce them given the recent strength of the Swiss franc.

The , which tracks the U.S. currency against a basket of six other currencies, remained around its highest level since May 2, driven mainly by the euro's weakness.

FRAGILE CHINA

Asian stock markets fell as mixed economic news from China underscored the country's fragile economic recovery.

While retail sales beat forecasts thanks to the Christmas boost, the data deluge was otherwise largely negative: Blue-chip Chinese stocks fell 0.2% after industrial production and investment in fixed assets were disappointing.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.26%.

U.S. stocks looked set to follow the calm mood, falling slightly, while tech-heavy Nasdaq futures added 0.1% as mega-cap stocks including Apple (NASDAQ , Microsoft (NASDAQ and Nvidia (NASDAQ rose between 0.2% and 0.6%.

Analysts at Goldman Sachs have raised their year-end target to 5,600, from 5,200 and the current 5,431.

“Our 2024 and 2025 earnings estimates remain unchanged, but stellar earnings growth from five mega-cap tech stocks has offset the typical pattern of negative revisions to consensus EPS estimates,” they wrote in a note.

The main US data this week will be Tuesday's May retail sales, where a 0.4% rebound is expected after a 0.3% drop in April. US markets will be closed on Wednesday.

At least 10 Federal Reserve officials will speak this week and will no doubt address the market's bets of two rate cuts this year.

While the Federal Reserve itself took a hawkish stance last week, a trio of weak inflation numbers led futures to price in a 76% chance of a cut as early as September and 50 basis points of easing for the year.

The dollar was steady against the yen at 157.45, after briefly rising above 158.00 on Friday when the BOJ said it would begin tapering bond purchases a little later than many had expected.

fell 1.9% on Monday, and investors now face a six-week wait for details of the Bank of Japan's next tightening measures.

In commodity markets, gold fell 0.5% to $2,321 an ounce, undoing some of last week's 1.7% gain. (GOAL/)

Oil prices held firm after choppy economic data from China countered hopes for a surge in demand from the summer driving season in the northern hemisphere.(O/R)

It fell 3 cents to $82.59 a barrel at 1122 GMT, while it slowly eased to $78.42 a barrel.