French stocks lead European losses, while the BoJ fail to lift the Yen

• French stocks head lower on heightened political risk
• G7 meeting focuses on Middle East and Ukraine conflicts
• BoJ cautious approach sends the yen lower

European markets remain on the back foot in early trade, with the French CAC index continuing to feel the pressure as markets weigh up the potential implications of a Macron loss in the impending snap election. Soaring borrowing costs are already hitting the French government, as the perceived risk attached to a potential victory for the Far Right pushed the cost of sovereign debt higher. Comments from the French Finance minister over the potential financial crisis could be a potential warning sign to the electorate, but it also sends a message to the market which has clearly been heard. Nonetheless, with the CAC trading roughly 5% lower over the course of this week alone, traders will also view this as a potential opportunity to buy the dip should Macron manage to guide his way to a parliamentary election victory.

Amongst all the political turmoil back in France, Macron has joined his fellow leaders in Italy for one of the most unpopular G7 meetings in memory. With 2024 bringing a whole host of elections across the globe, many of these leaders face a battle remaining at the helm beyond this year. Top of the agenda will be to help build on the Israel-Hamas peace deal proposed by Biden, whilst also helping to fund the Ukrainian efforts given the risk that Trump removes US support.

The Japanese yen has been hit hard once again overnight with the Bank of Japan opting to hold off on any discussions around JGB tapering until the next meeting. While the decision to keep interest rates steady was widely anticipated, many had believed we would see the bank layout a pathway that saw them taper the amount of government bonds being purchased per month. The cautious approach appears to have emboldened Yen bears once again sparking a yen decline that saw USDJPY hit the highest level since April.