Global equity markets – including the US, Hong Kong, Europe and Singapore – rebounded yesterday after a few days of selling. 

This seemed more of a ‘technical rebound’, however, in the consolidation phase, as investors wait for corporate earnings to paint a clearer picture of the fundamental outlook. Market sentiment still remains fragile ahead of the tight first round of the French election, this Sunday.

The rise of extreme ‘anti-system’ candidates Marine Le Pen and Mélenchon added to concerns about mounting populism in Europe in the wake of the UK’s decision to leave the EU last year.

We are seeing a considerable number of polls forecasting an incredibly tight race, delivering huge uncertainty to the forex markets. Volatility in the forex market is expected to surge in Asian trading hours on Monday morning following the flash estimate of first-round results by the media at about 3am Singapore time. Currency pairs and indices that are more susceptible to huge volatility include EUR/USD, EUR/JPY, France 40 Index, VIX and gold.

The treasury markets are also getting affected as the strength of Le Pen and Mélenchon in the polls has have led to a spike in French borrowing costs due to concerns that the victory of either of these candidates will cast doubt over the future relationship between France and the EU. 


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