• European markets in the red after Friday’s NFP-led decline.

  • French snap election drives EUR and CAC lower.

  • Eurozone investor confidence improves, lifted by optimism of future conditions.

A sea of red has greeted traders in Europe, as the repercussions of Friday’s US jobs report continue to ripple throughout financial markets. Good news clearly remains bad news for markets, with a bumper 272k payrolls figure serving to shift rate expectations that has swung back in favour of a September pause from the Fed. Traders look set to retain their central focus on US economic considerations with Wednesday's CPI inflation gauge providing the precursor to the latest FOMC interest rate decision. With first quarter earnings out the way, markets are likely to be increasingly sensitive around economic data, posing significant risks for market sentiment given the potential reflation trend emerging over the coming months.

Amid a widespread risk off tone seen throughout European markets, it is the French CAC which has seen a concerning 1.6% decline in early trade. The weekend’s European Parliamentary vote saw major inroads being made by the Eurosceptic nationalists, pushing President Macron to call a snap election in a bid to regain authority. With that initial vote now less than three weeks away, it comes as no surprise to see weakness across French stocks and the euro as traders weigh up this fresh bout of uncertainty.

Today’s relatively quiet economic calendar has seen a welcome rebound for the Sentix Investor Confidence survey, rising into positive territory for the first time in over two years. Notably that headline rise has been based on improved expectations of the future (+10), with the ‘current situation’ figure (-9) highlighting the continued concerns over present economic conditions. Looking forward, markets will be patiently awaiting tomorrows UK jobs report, with the prospect of a decline in wage growth bringing potential optimism that underlying inflation pressures are abating.

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