LONDON (Reuters) - Global markets appeared largely calm on Friday, the last day of trading before the first round of France’s presidential election, with French bond yields hitting a three-month low and the euro treading water against the dollar.
European stocks edged up, with the pan-European STOXX 600 index up quarter of a percent on the day by 1230 GMT.
U.S. stock index futures indicated Wall Street would also open a little higher, though investors stayed away from making big bets in either direction ahead of Sunday’s vote.
The euro edged down 0.2 percent to $1.0699, less than a cent away from a three-week high hit earlier in the week.
Investors seemed relatively confident that while the far-right Marine Le Pen might well win enough votes on Sunday to make the second round on May 7, she will then be comfortably beaten, probably by centrist candidate Emmanuel Macron.
“On the assumption that the French election will provide a market-friendly winner, we believe that euro zone assets may be poised to rally strongly in the next few weeks as political risk declines,” said Mark Dowding, partner at BlueBay Asset Management in London.
“But the sheer unpredictability of a four-horse race creates a real sense of uncertainty. As a result we believe that it may be appropriate to wait until the start of next week before adding to positions,” he added.
France’s CAC stock index edged down 0.1 percent, just over 1 percent off its highest levels since mid-2015.
A fatal attack on police officers in Paris overnight caused investors some immediate jitters, with the gap between French and German 10-year borrowing costs -- a key indicator of election nerves in recent months -- rising sharply in the first few minutes of trading in Europe.
Dealers said this was on concern the attack could sway the vote in favour of anti-immigrant Le Pen, whose anti-European Union stance is of concern to many in the markets.
But that move reversed as the session wore on, with the yield on 10-year French government debt hitting its weakest since mid-January and the gap between it and its German equivalent falling to its tightest in three weeks, before French yields rose a little again to trade flat on the day.
Although falling yields usually indicate investors seeking safety, in the case of the election uncertainty lower French yields imply a more steady-as-she-goes approach to the future.
Options markets suggested investors remain worried about strong results for Le Pen and/or hard-left challenger anti-EU Jean-Luc Melenchon that would point to the risk of another major political shock for Europe in two weeks time.
“It is kind of reminiscent of the big events last year where people know that it is a binary outcome so the best approach is to remain as cautious as possible,” said Simon Derrick, head of the global markets research team at Bank of New York Mellon in London.
Asian stocks ended the week on a positive note, unscathed by a U.S. trade probe on Chinese steel exports. MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.5 percent, but was down 0.4 percent on the week.
Asian steelmakers were mostly steady or higher, as investors dismissed for now any negative impact from the launch of a U.S. trade probe against Chinese steel exporters, although Chinese companies shed some of their earlier gains. The move sent their U.S. counterparts surging over 8 percent overnight.
“The U.S. accounts for a small proportion of China’s steel exports,” said Yang Kunhe, steel analyst at Northeast Securities in Beijing, adding Northeast Asia and Africa have been growing markets for Chinese steel over the past few years.
“But if Trump’s probe translates into actions, it would increase the chance of trade friction, and hurt market sentiment.”
Markets also mostly shrugged off White House comments that the U.S. may consider tit-for-tat tariffs on imports, and concerns raised by the International Monetary Fund that U.S. tax cuts could fuel financial risk-taking and increase public debt.
Japan’s Nikkei advanced 1 percent, posting a weekly gain of 1.6 percent.
The safe-haven yen, which tends to move inversely to the Nikkei, was on track for its worst week against the dollar in seven, down around half a percent as nerves over geopolitical tensions have eased off a touch.
In commodity markets, oil held near $53 a barrel on Friday, but was on course for its biggest weekly drop in a month due to doubts that an OPEC-led production cut will restore balance to an oversupplied market.
Gold was flat at $1,282.62 an ounce.
Additional reporting by Kit Rees, Abhinav Ramnarayan, Marc Jones and Patrick Graham in London, and Nichola Saminather, John Ruwitch, Samuel Shen and Sadiq Iqbal Ahmed in Singapore