Euro, stocks drop as Macron calls snap vote

EuroSTOXX 50 equity futures slipped 0.4% and French bond futures dropped to extend a sharp decline from late last week

The euro dropped while stock and bond futures declined on Monday, as French President Emmanuel Macron called a shock election after being trounced in the EU vote by the far-right.

The euro dropped 0.3% in early-morning trade in Asia to a one-month low of $1.0764 and slid to a 21-month low of 84.60 pence.

EuroSTOXX 50 equity futures slipped 0.4% and French bond futures dropped to extend a sharp decline from late last week. The focus for investors when wider European markets open later on Monday will likely be Italy's 10-year government bond yield gap over benchmark German paper – often a good barometer of risk appetite in the region.

Centre, liberal and Sociality parties were set to retain a majority after European Parliament elections, but eurosceptic nationalists made the biggest gains in Sunday's vote, raising questions about the ability of major powers to drive policy in the bloc.

Making a risky gamble to reestablish authority, Macron called a parliamentary election with the first round on June 30.

If the far-right National Rally party wins a majority, Macron would be left without a say in domestic affairs.

That is probably somewhat bad news for markets, according to Berenberg chief economist Holger Schmieding.

It introduces an unexpected element of uncertainty, Schmieding added.

Britain holds a general election on July 4 and crucial U.S. elections take place in November, while markets have lately turned fragile as U.S. rate cut expectations have diminished.

The prospects of a far-right victory in France's snap elections may keep the euro under pressure in the near term, stated Mansoor Mohi-Uddin, chief economist at Bank Of Singapore, though U.S. data and policy will be the main driver.