European stocks were weaker again on Friday, extending this week's losses on growing political worries in France.

The CAC 40 fell 1.5% and has dropped 5% so far this week.

"European markets remain on the back foot in early trade, with the French CAC index continuing to feel the pressure as markets weigh up the potential implications of a Macron loss in the impending snap election," Scope Markets said.

Investors are concerned about the prospect of outright victory for Marine Le Pen's far-right National Rally party--with polls showing a risk of this--and a move away from European Union fiscal rules, Pepperstone said.

"Traders are expecting increased movement in euro assets."

If Le Pen's party governs, the 10-year French-German yield differential could exceed 80 basis points, sending the CAC-40, French banking stocks and the euro down further.

Stocks to Watch

Airbus should still be able to hit its annual aircraft delivery target for the year despite a weak May marked by several public holidays in France, UBS said.

The plane maker dispatched 53 aircraft in May, bringing deliveries so far this year to 256. Airbus is targeting around 800 for the whole year. UBS noted that seasonality plays in Airbus's favor since the bulk of deliveries generally take place in the second half of the year, especially in December.

U.S. Markets:

Stock futures mostly edged lower, while Treasury yields rose.

Tesla is in focus , after shareholders voted to uphold Elon Musk's huge pay package and voted in favor of moving the electric-car maker's legal home to Texas from Delaware.

The outcome was largely expected since Musk had posted on X that the shareholder resolutions were passing by wide margins prior to Tesla's annual shareholder meeting.


Jitters ahead of French snap elections lifted one-month implied volatility in the euro against the dollar--a measure of options pricing which reflects the perceived risk of future moves--to its highest in nearly eight months, Refinitiv data show.

The dollar hit a five-week high against a basket of currencies, shrugging off Thursday's weaker-than-expected U.S. producer prices data and helped by weakness in the yen and the euro.

The yen fell after the Bank of Japan opted to maintain government-bond purchases until its next meeting in July while political uncertainty due to prospects of a snap election in France continued to weigh on the euro.

"The U.S. dollar bears couldn't take advantage of softer data yesterday due to contradictory dynamics elsewhere," Swissquote Bank said.

Brown Brothers Harriman said the dollar continues to build on the gains it made after the Federal Reserve's policy meeting on Wednesday.

"The Fed's guidance that it plans to keep the funds rate higher for longer while other major central banks have started to cut rates is dollar supportive."

Brown Brothers Harriman said the dollar's rise reflects rising differentials between Treasury yields versus bond yields of other major economies.


Citi Research said markets are treating the possibility of a far-right-led government in France as a high-probability, high-risk severity event and suggested there's scope for further widening of the 10-year OAT-Bund yield.

Still, the risk premium and short buildup so far are only half of that seen during the 2017 election, perhaps due to lack of talk of an EU-exit, Citi said.

The yield spread is trading at multiyear highs of 77 basis points, up nine basis points, according to Tradeweb, with 80 basis points being the next level in sight, UniCredit Research said.

"Hopes for serious support around the 2020, 2022 and 2023 peaks were dashed. The next reference point is the peak that occurred around the 2017 presidential election at 80bp," UniCredit said.

SEB Research said should the European Central Bank cut policy rates in line with market pricing to a terminal rate of around 2.50%, German two-year bond yields are expected to decline at least 50 basis points from the current level of around 2.80%.

The 10-year Bund yield is more likely to have structurally very limited room to fall as the ECB is reducing its securities holdings, SEB said.

"We think that a fully feasible scenario would also be one where the German 10-year yield gradually edges higher to above 2.70% while the ECB keeps reducing the policy rates."

SEB also said Treasury yields are likely to fluctuate in a broad range this summer, responding to key individual economic data.

"If the data softens in line with our expectations, yields may temporarily undershoot in the autumn to levels that may not be sustainable if a soft landing is prospectively confirmed."

This implies a temporary decline in yields before a recovery if the U.S. inflation is lowered to target without the economy slipping into recession.

"We expect the 10-year Treasury yield to trade near 4.30% at the end of the year," SEB said.


Oil prices edged lower but were on track for weekly gains despite mixed signals on the demand outlook.

Stricter adherence to oil production quotas set by OPEC and its allies should offset any potential increases under the group's gradual phase-out plan, according to ANZ Research.

OPEC+'s aim to gradually unwind voluntary cuts of 2.2 million barrels a day starting from October sparked an oil selloff last week, fuelled by fears of an oversupplied market next year. But "stricter adherence to quotas could see non-compliant members reduce output in coming months," ANZ said.

"This should see the crude oil market remain well supported over the next 18 months."


Gold futures remained in a narrow band after the Federal Reserve damped expectations of interest rate cuts soon, but BMI said the metal should remain firmly above the $2,250 mark over the coming months on geopolitical uncertainty.

Further, bullion's non-yielding characteristic is also supporting prices, as a Fed interest rate cut will arrive eventually, BMI added.


Atos Gets $752 Million French Government Bid for Computing, Cyber Assets

Atos received a nonbinding offer from the French government to buy part of the IT-firm's big data and cybersecurity division for 700 million euros ($751.6 million), including debt.

A potential sale could offer a lifeline to the debt-laden company that earlier this week picked a financial-rescue proposal from a consortium including key shareholder Onepoint, though the value of the bid is on the low end of what the French government had previously indicated.

Stellantis Moves Some EV Production Out of China Due to EU Tariffs

Stellantis, the carmaker behind brands like Jeep and Fiat, decided to shift production of some electric vehicles away from China due to upcoming European Union tariffs on Chinese-made EVs.

The company shifted its production plans for electric vehicles made with Chinese joint-venture partner Leapmotor because of higher European import duties, Stellantis Chief Executive Carlos Tavares said Thursday, according to a FactSet transcript of the company's investor meeting.

U.K. Grocer Tesco Posts Sales Growth Lifted by Volumes, Market Share Gains

Tesco's sales rose in the first quarter and the company backed its guidance for the year, with easing inflation supporting strong volume growth and market share in its core U.K. market.

The supermarket chain on Friday posted 15.305 billion pounds ($19.53 billion) in group retail sales excluding value-added tax and fuel for the 13 weeks ended May 25. Like-for-like group retail sales grew 3.4% over the period.


Bank of Japan Plans to Reduce Bond Buying, Yen Weakens

TOKYO-The Bank of Japan said it would reduce government bond purchases in a signal of monetary tightening, as it left its policy interest rate unchanged.

Monetary tightening in general should support the yen, but the Japanese currency instead weakened Friday because the central bank didn't offer specifics on its bond plans.

How the Fed Can Cut Rates This Summer Without Cutting Rates

The Federal Reserve has more than one way to work its will on the economy. It could soon start using its more subtle tools to start nudging rates down. That still would have a real impact on businesses and households.

The central bank most directly controls short-term rates by setting a target range for the federal-funds rate, the rate at which banks lend money to one another overnight. On Wednesday it left this target unchanged while saying that Fed policymakers on average expect to cut this rate range just once this year, down from an expectation of three times in March.

Macron's Gamble on Stopping Le Pen Now Risks Ushering Her to Power

PARIS-President Emmanuel Macron has always aspired to become one of the great men of history, saving Europe from the fires of populism and setting its economy on course to compete with the U.S. and China.

The question now looming over Macron is whether he will go down in history as the man who ushered Marine Le Pen and her far-right party to the threshold of power in France.

Write to

Write to us at

We offer an enhanced version of this briefing that is optimized for viewing on mobile devices and sent directly to your email inbox. If you would like to sign up, please go to

This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

06-14-24 0538ET