European Markets Creep Down Despite Macron Win; China Falls on Regulation Worries

By Ese Erheriene Features Dow Jones Newswires

European markets reacted in a muted fashion to Emmanuel Macron's victory in the French presidential race , as the results largely confirmed expectations that political risks were unlikely to derail the eurozone's economic recovery.

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Despite a rally in Asian stocks Monday, the Stoxx Europe 600 edged 0.2% lower in the early minutes of trading Monday, weighed by declines in mining stocks. France's CAC-40 index inched down 0.4% after ending at its highest since early 2008 on Friday.

"With the market expecting this kind of result [in the French election], there is no goodwill affect today," said Gilles Pradère, a portfolio manager at RAM Active Investments.

The euro was off 0.3% at $1.0966 after briefly touching a seven-month high shortly after the vote on Sunday. The gap between French and German government bonds widened slightly in morning trading after narrowing significantly following the first round of the vote.

Still, many investors said the long-term impact from the French vote on European assets would be a positive one.

"A lot of the story of Europe is, it's been held back by political risk, " said Ryan Myerberg, portfolio manager at Janus Capital.

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"As we put that to bed, for some time, the market can focus on some positives that've been lost in the wash," he added, pointing to improvements in European confidence surveys and purchasing managers' indexes and a modest pickup in inflation.

In the weeks between the first and second rounds of the French vote, Mr. Macron solidified his lead in the polls over anti-euro candidate Marine Le Pen, and European markets rallied as investors dialed down fears that France would elect a euroskeptic candidate and consider pulling out of the currency union. The euro climbed to its highest level this year, spreads between French and German bonds returned to November levels and European stocks had rallied.

Focus for investors now turns to French legislative elections in June, which analysts say will determine whether Mr. Macron can push through his agenda.

Earlier, markets in Asia moved higher, supported by a spate of robust corporate earnings and a slightly better-than-expected April jobs report in the U.S. on Friday, which lifted the S&P 500 and Nasdaq Composite to record highs.

Japan's Nikkei Stock Average rose 2.3% to its highest level in 17 months, as it reopened after public holidays. Korea's Kospi also added 2.3%, hitting an all-time high, while the S&P/ASX 200 in Australia gained 0.6% and Hong Kong's Hang Seng Index added 0.6%

Stock markets in China were lower however, amid concerns that sustained regulatory tightening might force funds to exit. Investors were jolted by rumors on social media Friday that regulators were scrutinizing asset-management operations as part of efforts to cut leverage in the financial industry. The Shanghai Composite Index fell 0.8%.

China's General Administration of Customs said April exports rose 14.3% on the year in yuan terms Monday, while imports were up 18.6% on the year. Both increases were lower than the March numbers. The country's trade surplus widened to 262.3 billion yuan ($38 billion) in April from 164.34 billion yuan in March.

Oil prices rebounded Monday from sharp losses sustained Friday, with brent crude last up 0.5% at $49.33 a barrel. Copper futures fell 1.6% to $5,495 a ton, dragging down Europe's basic resources sector.

John Wu

,

Yifan Xie

, James Glynn and Yantoultra Ngui contributed to this article.

Write to Ese Erheriene at ese.erheriene@wsj.com

(END) Dow Jones Newswires

May 08, 2017 04:02 ET (08:02 GMT)