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The first round of the French legislative election went totally according to the plan for Marine Le Pen’s Nationally Rally which secured one vote over three and became the first far-right party to top the legislative elections in France. The New Popular Front – the alliance of left and greens - won 28% of the votes and Emmanuel Macron’s party posted a miserable 20%. The second round is due next weekend.

The kneejerk reaction was a jump in the euro and European equities in the early week trading on hope that Nationally Rally will struggle to get a parliamentary majority, but risks prevail.

Across the Channel, the week starts with increased election vibes as well, because Brits will be headed to their own general election this Thursday with little suspense on the horizon. A Labour win is seen as a net positive for financial markets and sterling.

In the US, last week’s data was supportive of the Federal Reserve (Fed) doves, but the narrow rally in US markets worry more than elections, for now.

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Sentiment yesterday was mixed on a series of mixed economic and corporate news. US growth confirmed further slowdown and fueled Federal Reserve (Fed) doves, while Trump’s dominance at yesterday’s debate against Biden fueled appetite for the US dollar regardless.

US crude finally cleared the critical $82pb resistance, and returned to the positive trend that was building at the start of the year.

There is one more thing to watch before this week ends: the core PCE data – the Fed’s favourite gauge of inflation that’s expected to show further weakness in both headline and core numbers. If that’s the case, combined with yesterday’s softish growth data, we could see the Fed doves remain in charge of the market.

In Europe, inflation figures from Eurozone countries will be closely watched but may not derail the euro from its falling path into the first round of the French legislative election that will take place this weekend!

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The selloff in Japanese yen extended yesterday sending the currency to the lowest levels since 1986 against the US dollar and to the lowest levels against the euro. A direct FX intervention is expected at any time.

Elsewhere, the euro remains under the pressure of French political shenanigans and Cable clears important technical supports as the Australian dollar is among rare major currencies that challenge the dollar’s strength, after the Australian inflation hit 4% in May.

One thing that could derail the US dollar’s positive trajectory this week is economic data. Due today, the US will reveal its latest GDP update, and tomorrow we will have a look at the core PCE – the Federal Reserve’s (Fed) favourite gauge of inflation.

In equities and bonds, the US 2-year yield was slightly higher yesterday, the 5 and 10-year yields rose to the highest levels in two weeks despite a good 5-year bond auction as the rising Japanese yields rose anxiety among bond investors, but not among stock buyers. The S&P500 and Nasdaq closed slightly higher on Wednesday thanks to a late rally, as Amazon hit a record high.

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Nvidia shares jumped almost 7% in a single session, Rivian jumped more than 8.5% yesterday and soared 50% in the afterhours trading after Volkswagen announced that it will invest $5 billion to form a joint venture to develop the ’next generation battery-powered vehicles with leading-edge software’ and FedEx gained 15% after the company announced better-than-expected revenue and earnings.

All in all, yesterday was a good session, except for the Chinese stocks that were already under pressure and saw the downside pressure increase on news that OpenAI will be further curbing China’s access to its software. European stocks that remained under the pressure of French political shenanigans while Airbus was hit by a 9% selloff after lowering its profit outlook for this year by 20% due to supply chain problems.

On the bond side, a $69bn US 2-year note sale saw a good demand and kept the 2-year yield near 4.70%, the US dollar remains upbeat, the EURUSD is offered into 1.0750 while the Loonie continues to remain bid on strong appetite for oil and a stronger-than-expected CPI update.

In commodities, US crude consolidates gains below the $82pb Fibonacci resistance, while cocoa futures extend losses at increased speed.

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The selloff in Nvidia deepened yesterday and sent the shares into the correction territory following a more than 10% selloff.

One question that everyone asks is, whether last week’s good news marked the finale of the Nvidia’s surge to the top, and if the past three-day selloff is the beginning of a sharper downside correction. The other question in minds is if the price pullback a good opportunity to strengthen long position at a better price before Nvidia announces its Q2 earnings, where it’s expected to reveal a monstruous $28bn sales, which is more than the double of money is made the same time last year.

Yesterday’s 6.68% plunge in Nvidia shares didn’t do good to mood in Nasdaq 100. The index dropped more than 1% whereas losses in the S&P500 remained limited to 0.31%, as the financials gained 0.63% while energy sector rallied 1.70% on the back of a rebound in crude oil to retest the $82pb level resistance, the major 61.8% level on the latest selloff.

Elsewhere, the US dollar index eased yesterday, as the weekend euro bears scaled back their positions after the weekend, the USDJPY trades a touch below the critical 160 level as the yen bears are testing the nerves of the Japanese officials to see what level will trigger an FX intervention and the Loonie benefits from a rise in oil prices ahead of CPI update.

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The week kicks off on a weak note following a moody trading session across Europe and the US on Friday. One of the most significant moves of last two trading days of the US was a 10% selloff in Nvidia sales for … no reason other than the fact that it was the end of the month, the end of the quarter and the end of H1. And the problem with that is, because the US Big Tech stocks led by Nvidia were responsible for most of this year’s rally in major US indices, any weakness could derail the rally.

This week, the US will reveal its latest GDP update on Thursday and core PCE data on Friday. The latter better be soft enough to prevent a broader selloff in US indices. On the individual front, FedEx and Micron Technology are due to release earnings.

Elsewhere, appetite is limited. The Stoxx 600 in Europe was toppish last week as the French political uncertainties occupied the headlines. The EURUSD is under pressure. In Japan, the USDJPY is dangerously flirting with the 160 level – a level which had brought the Japanese policymakers to intervene to stop the bleeding back in April.

In energy, US crude is lower this Monday morning after having tested and failed to clear the $82pb resistance last Friday.

Chinese equities begin the week on continued downside pressure, while Indian assets will likely benefit from the Indian government bonds’ inclusion to a JP Morgan global bond index.

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The Swiss National Bank (SNB) cut its rate by another 25bp yesterday, the franc fell and the SMI rallied. The Bank of England (BoE) kept rates unchanged but the dovish accompanying statement send sterling lower and the FTSE 100 higher. On the continental Europe, a healthy sale of French government bonds help lifting French-darkened mood.

In the US however, the softer-than-expected economic data didn’t see improved appetite from the Fed doves. The fact that the Nasdaq 100 is near an important psychological level has to do with the latest reluctance to continue buying the tech-heavy US indices at overstretched valuations.

Today, it’s the triple witching day, about $5.5 trillion index futures, options, stock options and ETFs will expire at the same time. Given that we are at psychologically crucial, irrationally high, and mathematically overstretched levels, we could see surprise turns and twists in positioning.

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Appetite in Europe was weak yesterday in the absence of American markets. The French CAC40 remained firmly offered near its 200-DMA and fell 0.77%, the European Stoxx 600 index retreated 0.17%, and the Swiss SMI consolidated above the 12’000 mark while the FTSE 100 took out the 50-DMA and closed slightly higher at yesterday’s trading session.

Crude oil consolidated gains above the $80pb and remains supported by positive trend vibes since it stepped into the medium bullish consolidation zone after it cleared the major 38.2% Fibonacci resistance on April to June rally.

The day will bring three important policy announcements on top of China’s. China maintained its rates unchanged today at record lows, as expected, and the People’s Bank of China (PBoC) signaled a new toolkit that could allow the Chinese central bank to start buying government bonds – which would be a new way of injecting liquidity into the markets.

The Swiss National Bank (SNB) …. and the Bank of England (BoE) is not expected to make a chance before fall.

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Nvidia finally stole the title of the world’s most valuable company from Microsoft and Apple yesterday following a beautiful 3.5% rally that propelled the share price past $135 a share.

According to Bloomberg, the Magnificent Seven have contributed to more than 60% of the S&P500’s return so far this year. The rest is not doing as well. The S&P500’s equal weight index is stagnating, the reflation trade is weakening along with cautious Federal Reserve (Fed) talk and mixed economic data, there is still a chance that we see a sharp economic slowdown in the US as a result of a painful tightening cycle.

Data yesterday showed that retail sales in the US barely increased in May, last two month figures were revised to the downside and core retail sales even fell 0.1% from the month earlier. Industrial production on the other hand jumped more than expected. Across the Atlantic, inflation in the UK hit the Bank of England’s (BoE) 2% inflation goal and fueled speculation that the BoE could announce a surprise rate cut when it meets tomorrow. Sterling’s kneejerk reaction was surprisingly positive, however. There is little chance that tomorrow will bring a rate cut in the UK, but the thought of it could keep sterling bulls under control until tomorrow’s MPC decision.

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