Global Markets in Flux: Key Inflation Data and Political Uncertainty

Global markets faced uncertainty with MSCI's global equities index down and U.S. Treasury yields rising ahead of key inflation data and central bank meetings. The euro dropped following French President Emmanuel Macron's snap election call. U.S. equities also experienced declines, impacted by both technology stocks and anticipated Federal Reserve decisions.

MSCI'S global equities index was lower on Monday and U.S. Treasury yields rose ahead of key inflation data and central bank policy meetings, while the euro fell after French President Emmanuel Macron called a snap election. Along with the release of key U.S. inflation data due this week, investors are also waiting for the outcome of policy meetings at the Fed and the Bank of Japan.

The prospect of fresh political uncertainty in the euro zone's second-biggest economy weighed on sentiment there after far-right gains in European Parliament elections on Sunday prompted a bruised Macron to call a national election. The euro fell to a one-month low against the dollar , while European stocks slipped.

Gains in the U.S. dollar index came from "worries about some political instability" in Europe, said Michael O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut. "There was a big push to the right there, and now France is going have general elections, so there's just a little uncertainty that's weighing on the euro," he said.

MSCI's gauge of stocks across the globe fell 1.52 points, or 0.19%, to 792.72. The STOXX 600 index was down 0.55%, while Europe's broad FTSEurofirst 300 index fell 11.84 points, or 0.57%. On Wall Street, O'Rourke pointed to weakness among some megacaps, with the S&P weighed down by Nvidia, which fell after a stock split, and Apple Inc, which lost ground ahead of its annual developer conference where it is expected to unveil artificial intelligence updates.

On Monday at 10:37 a.m. (1437 GMT), the Dow Jones Industrial Average was down 39.83 points, or 0.10%, at 38,758.94, the S&P 500 was 4.05 points, or 0.08%, lower at 5,342.84, and the Nasdaq Composite was down 2.65 points, or 0.02%, at 17,129.92. Also weighing is the Fed's next policy decision on Wednesday, with U.S. inflation figures for May due just before that. This follows the May payrolls report, which on Friday showed the U.S. economy created far more jobs than expected while annual wage growth re-accelerated.

U.S. Treasury yields, which move inversely to prices, rose on Monday, reflecting the higher-for-longer U.S. rate expectations. The yield on benchmark U.S. 10-year notes rose 2.9 basis points to 4.457% from 4.428% late on Friday, while the 30-year bond yield rose 4 basis points to 4.5881%.

The 2-year note yield, which typically moves in step with interest rate expectations, rose 0.2 basis points to 4.872% from 4.87% late on Friday. In currencies, the dollar index, which measures the greenback against a basket of currencies including the yen and the euro, gained 0.2% to 105.28.

The euro was down 0.55% at $1.0741, and against the Japanese yen the dollar strengthened 0.1% to 156.86. The Bank of Japan (BOJ) holds a two-day monetary policy meeting this week and could offer fresh guidance on how it plans to scale back its massive bond purchases.

In commodities, oil prices rose on hopes of rising fuel demand this summer, though gains were capped by dollar strength and receding expectations of U.S. rate cuts. U.S. crude gained 1.23% to $76.46 a barrel and Brent rose to $80.45 per barrel, up 1.04% on the day.

Gold prices regained some ground after dropping the most in three-and-a-half years in the previous session, as Chinese and U.S. data disappointed speculators betting on Chinese demand and a Fed interest rate cut. Spot gold added 0.51% to $2,304.49 an ounce.