Markets heading for the French presidential election

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Financial markets continued to digest the massive Fed’s balance sheet reduction expected from next month on Thursday, with the US 10-year bond rate increasing further to 2.66% this morning. Global equity markets are heading for weekly losses with concerns over the impact of Covid lockdowns in China weighing on market sentiment. 

Euro Zone retail sales released yesterday were disappointing as they increased by just 0.3% month-on-month following a 0.2% increase in January, below a consensus at 0.6% with food expenditure declining and most other categories increasing. 

EU countries agreed on a ban on Russian coal yesterday, sanctioning the energy sector for the first time. Talks around a ban on Russian oil imports will be on the table of Monday’s EU foreign affairs council meeting. 

We mentioned yesterday the widening of the FR-DE 10-year bond spread ahead of the first round of the French presidential election on Sunday on the back of tighter polling between Macron and Le-Pen in recent weeks, but the EURUSD rate seems to suffer as well as it dropped below the 1.09 mark to a one-month low this morning as some market players may be tempted to reduce their EUR exposure.