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As Political Jitters Ease, World Stocks Give Mixed Yields and French Yields Fall

As Political Jitters Ease, World Stocks Give Mixed Yields and French Yields Fall
While a more cautious mood hung over world stock markets and the dollar, both of which struggled for clear direction, the French 10-year bond yields hit a one-month low on Monday, pushing other euro zone sovereign yields lower.
Relieving some fears that have built up in recent weeks among investors, polls showed centrist Emmanuel Macron would easily beat far-right candidate Marine Le Pen in May's presidential election runoff and the fall in French bond yields came as the poll results were revealed.
"Macron gained further support in the polls," said DZ Bank rates strategist Rene Albrecht. "Another important point is that it looks like Hamon and Melenchon won't merge, so there is less of a chance that we will have a left-wing candidate that could outpace Macron or Fillon."
They are discussing cooperation in their bid for the presidency but are seen struggling to find a common platform, hard-left candidates Benoit Hamon and Jean-Luc Melenchon have said.
While U.S. Treasury yields recovered some ground following last week's decline, the steepest weekly fall in months, world stocks and the dollar trod water.
IN Europe, the most notable moves at the start of a week in which U.S. President Donald Trump's State of the Union address on Tuesday will loom large, were the French-led fall in bond yields and tightening of spreads over Germany.
In his joint address to Congress, Trump is expected to unveil some elements of his plans to cut taxes.
Noting the highest since late 2012, the yield gap was pushed to around 84 bps last week by fears about the French election.
In stocks, it was also a mixed bag. U.S. futures pointed to a slightly higher open on Wall Street, Asian bourses fell and benchmark European markets were flat.
"This morning's moves follow what was a fairly cautious end to the week on Friday for markets," said Jim Reid, markets strategist at Deutsche Bank.
On course for its first consecutive daily fall for three weeks was the MSCI's benchmark world stock index which slipped 0.1 percent to 444.53 points.
While Euro zone stocks performed better, with the index of leading 50 shares up 0.3 percent, lifted by a 0.8 percent rise in bank stocks, the index of the leading 300 European stocks was flat on the day at 1,457 points.
Following Friday's 0.7 percent fall, MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.3 percent.
Hitting a 2-1/2 week low on concerns that a stronger yen would crimp corporate earnings, Japan's Nikkei closed 0.9 percent lower.
Suggesting increased caution, major indices spent much of that day's session in negative territory though U.S. stocks clawed their way to a higher close on Friday.
Rates and the dollar will take their cue this week from Federal Reserve Chair Janet Yellen's speech on Friday in addition to Trump's address to Congress.
"In order for the Fed to really have the option of hiking next month, Yellen will have to make a much stronger case relative to what's been said recently," Deutsche's Reid said.

Christopher J. Mitchell

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