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Oil and Asia equities rally after Macron wins in France

Monday 02:50 BST

Overview

Equities and oil rallied in Asia while currency movements were limited, as Emmanuel Macron’s widely expected triumph in the French presidential election reinforced a risk-on mood.

Hot topic

The euro edged up 0.1 per cent to a six-month high of $1.1021 in the hours after it became clear that Mr Macron had beaten Marine Le Pen. The currency later slipped back 0.3 per cent to $1.0968.

The “focus in the eurozone will now likely shift away from politics and move on to the ECB,” said Julien Lafargue, European equities strategist at JPMorgan. “With a political agenda that should remain relatively light for a few months, the ECB’s meeting on June 8th will likely offer some insights on the key subject of QE tapering.”

While the election result was as expected, investor relief was still evident in the movements of the Japanese yen — a perceived haven — which weakened 0.1 per cent to ¥112.78 per dollar.

The Australian dollar dropped 0.3 per cent to $0.7395, on the back foot after data showing the biggest yearly drop in building approvals in six months.

Worst off among global currencies was the South African rand, down 0.6 per cent at 13.5 per dollar after a weekend warning from three former presidents that the country must put the constitution first — a thinly veiled attack on Jacob Zuma, who last month sacked South Africa’s respected finance minister.

The dollar index, which measures the greenback against a basket of global peers, was up 0.1 per cent at 98.764.

Equities

Stocks across Asia were on the upswing, although the direct impact of the French election was limited with major bourses buoyed as a recovery in oil prices fuelled a rebound for energy stocks.

In Tokyo as markets reopened after a three-day holiday, the Topix was making up for lost time with a rise of 1.8 per cent and gains across the board. The energy sector was up 3 per cent on the back of rising crude prices, with financials and real estate stocks up 2.4 per cent.

Sydney’s S&P/ASX 200 was up 0.6 per cent, aided by a 1.8 per cent gain for energy stocks. Australian media stocks got a boost from a government plan to scrap media ownership restraints as well as a number of other changes including abolishing licence fees for broadcasters and restricting gambling advertising. Most shares in the S&P/ASX 200’s media sector were up between 1 and 6 per cent, but Ten Network surged as much as 48 per cent in the hope the changes could spur takeover interest.

Hong Kong’s benchmark Hang Seng Index was up 0.3 per cent, with energy stocks up 1.1 per cent. Tencent rallied 1.4 per cent, after slipping 0.3 per cent on Friday after its WeChat app ecosystem was blocked in Russia last week.

Commodities

Oil prices were climbing with Brent crude, the international benchmark, up 0.8 per cent at $49.49 a barrel. Brent closed Friday with a gain of 1.5 per cent, which nevertheless left it down 5.1 per cent for the week. It fell below $50 a barrel last week amid growing concerns about rising US output and increasing scepticism over Opec’s ability to keep a lid on global production.

West Texas Intermediate, the US marker, was up 0.8 per cent in Asia at $46.57 a barrel, after rising 1.5 per cent on Friday but closing the week down 6.3 per cent.

Gold, after a dip at the open, was up 0.2 per cent at $1,230.44 an ounce, largely unmoved by confirmation of Mr Macron’s election win.

Fixed income

Asia sovereign bond yields rose in response to gains for regional stocks and investors’ perception of lowered risk following the as-expected France election outcome. The yield on 10-year US Treasuries was up 1 basis point at 2.358 per cent. Yields move inversely to prices.

Yield likewise rose 1 bp to 0.02 per cent for 10-year Japanese government bonds, while the 10-year Australian yield climbed 3 bps to 2.671 per cent.

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