That would bring the French spread over Bunds to a level similar to that of Spain, said Giovanni Zanni, chief euro area economist at NatWest Markets.

In the first round, Emmanuel Macron secured a lead ahead of Le Pen, but the "lead is too small for comfort," Zanni said.

---

Julius Baer keeps its strategy unchanged following the ECB's meeting last week, which didn't reveal anything signicantly new and was digested relatively well by spread markets, although yields are still rising, said Dario Messi, fixed income analyst at Julius Baer.

"From a bond investor's perspective, the ECB's strategy to stick to 'optionality, gradualism, and flexibility' is definitely very welcome," he said in a research note.

However, the more inflation rises, the more bond investors will become wary ahead of monetary policy meetings as any lapse in communication could push yields even higher, he said.

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Mizuho's rates strategists expect U.S. rates to move sideways in the next couple sessions, with investor preference for short-dated bonds.

"Given Fed expectations and the [quantitative tightening] ahead, buyers should still prefer the front-end, allowing the steepening bias to continue," Mizuho's strategists said.

They expect a similar trend for euro rates. In the near term, marginal investors should now be more willing to add more exposure in the higher carry sectors, such as the front-end, assuming that many see limited probability for Marine Le Pen to win the French presidency on Sunday.

Commodities:

Oil prices edged lower in Europe despite concerns about Libyan supply adding to the mix of constrained OPEC output and strong demand.

Oil analysts are expecting Libyan output to fall by more than 500,000 barrels a day after the country's Sharara oil field was closed amid a growing political crisis. A political standoff has prompted protests which have sought to shut down oil fields.

Up to 1 million barrels a day of oil could be at risk if closures and the standoff continues, DNB Markets said.

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Precious metals were weaker in Europe, with expectations the European Union could set out more sanctions on Russia, largely targeting fossil fuels, likely to support prices according to analysts.

Gold hit a five-week high on Monday over inflation fears, but "the prospect of EU sanctions on Russian oil should keep gold bid on dips," said Stephen Innes, managing partner SPI Asset Management.

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Supply concerns for copper and aluminum were lifting base metals prices following the Easter weekend, with the long-term outlook remaining uncertain.

Aluminum inventories hit a 15-year low last week with this trend "likely to continue, leaving room for further inventory withdrawal," according to a note from analysts at ANZ Research.

Peru's Las Bambas copper mine is also seeing disruption, helping to support prices.


EMEA HEADLINES

Scor Braces for High Double-Digit Million Euro Hit on Ukraine Invasion

Scor SE on Friday said that it expects to make a loss in its first-quarter results, hit by the impact of the war in Ukraine.

The French reinsurer said it expects to book a quarterly charge in the high double-digit million euro range for potential claims related to the conflict, which it said would affect business lines like political risks, credit and surety, and aviation.


Pearson Reiterates 2022 Guidance; Arizona State University Contract to End in 2023

Pearson PLC said Tuesday that its online program management partnership with Arizona State University will end in June 2023 and that it is reiterating financial guidance for 2022.

The FTSE 100 education company said the profit impact from the termination of the contract will be modest in 2022 and 2023 and will be subsequently offset through eliminating related costs and redirecting investment across growth opportunities.


Russia Begins New Military Offensive in Ukraine's East, Ukrainian President Says

KYIV, Ukraine-Ukrainian President Volodymyr Zelensky said Monday that Russian forces have begun a fresh offensive in eastern Ukraine, signaling the latest phase of an invasion that has led to a new confrontation between Russia and the West.

"Russian troops have started the battle for Donbas, which they had been preparing for a long time," Mr. Zelensky said in an address late Monday. "A large portion of the army has been concentrated to carry out this offensive."


In Ukraine's South, Russian Occupiers Tighten the Screws

DNIPRO, Ukraine-Russia is tightening its hold over occupied areas of southern Ukraine, installing pro-Moscow leaders, hunting for dissenters and dismantling Ukrainian state institutions.

In the city of Melitopol, like many others in the area, red, blue and white Russian flags now fly atop public buildings. Russian security forces patrol the streets and soldiers man checkpoints, inspecting people's identification documents and looking through the contents of their mobile phones, residents say.


Spotify Rival Deezer Strikes SPAC Deal Valuing It at About $1.1 Billion

PARIS-French music streaming service Deezer is merging with a special-purpose acquisition company and aiming to go public at a EUR1.05 billion, or about $1.13 billion, valuation, the companies said.

The Paris-based competitor to Spotify Technology SA and other music streamers has 9.6 million subscribers and generated revenue of EUR400 million in 2021, Deezer said in a statement. The music streaming service offers listeners a catalog of more than 90 million songs, as well as podcasts, audio books and radio channels.


British Encryption Startup Arqit Overstates Its Prospects, Former Staff and Others Say

A U.K. cybersecurity startup rocketed to a multibillion-dollar valuation when it listed publicly last fall on the promise of making encryption technology that would protect the defense industry, corporations and consumers alike from the prying eyes of next-generation computer systems. Founder and Chief Executive David Williams told investors at the time that his company, Arqit Quantum Inc., had an "impressive backlog" of revenue and was ready "for hyperscale growth."

But Arqit has given investors an overly optimistic view of its future revenue and the readiness and workability of its signature encryption system, according to former employees and other people familiar with the company, and documents viewed by The Wall Street Journal.


Israel Airstrikes Hit Gaza After Rocket Fire

TEL AVIV-Israel carried out airstrikes in Gaza early Tuesday in response to a rocket fired from the Palestinian territory, raising fears of a wider conflict amid heightened tensions after days of clashes at a sensitive holy site in Jerusalem.

Israel's military said it targeted a Hamas weapons-manufacturing site in Gaza, hours after it intercepted the rocket near the Gaza border with its Iron Dome aerial-defense system, which set off warning sirens in southern Israel late Monday. There weren't any immediate reports of injuries on either side.


Israel's Government Faces Collapse as Arab Party Threatens to Quit Over Jerusalem Clashes

TEL AVIV-Israeli Prime Minister Naftali Bennett's government faces another challenge to its survival, as a rocket fired late Monday from Gaza raised fears of a new conflict and clashes between Israeli police and Palestinians in and near Jerusalem's most sensitive holy site threaten the fragile ruling coalition.

Israel's military said it shot down a rocket fired into its territory from the Gaza Strip, breaking months of quiet on that border. Both Palestinian militant group Hamas, which controls the Gaza Strip, and Islamic Jihad, its smaller militant partner, have threatened in recent days to strike Israel over tensions between Palestinians and Israelis in Jerusalem and the West Bank.


Sweden Arrests Dozens in Clashes Over Far-Right Leader's Plan to Burn Quran

Police in Sweden said Monday they have arrested dozens of people following clashes over plans by a far-right Scandinavian politician to burn a Quran over Easter weekend.

Over the weekend, people rioted in several cities, throwing Molotov cocktails at emergency vehicles and burning trash cans and a municipal bus.


GLOBAL NEWS

Fed's Bullard Casts Doubt on Need for Rate Increases Larger Than 50 Basis Points

One of the Federal Reserve's earliest advocates for aggressive rate increases won't rule out a truly supersize rise, though he doesn't expect one is needed.

When it comes to the size of a rate increase, one greater than 50 basis points "is not my base case," Federal Reserve Bank of St. Louis President James Bullard said during a virtual appearance Monday. But he noted the Fed has increased rates by more, and when it comes to a potential 75 basis point increase, "I wouldn't rule it out."


Reserve Bank of Australia Says Inflation Has Accelerated Rate-Rise Timetable

SYDNEY-The Reserve Bank of Australia says rising inflation and wage growth have brought forward the timing of its first interest-rate rise since 2010, apparently supporting the view of economists expecting a June hike.

Underlying inflation rose to 2.6% in the December quarter and minutes from the RBA's April 5 board meeting, released on Tuesday, showed that members discussed how recent increases in fuel, food and other commodity prices would further raise the cost of living in coming quarters.


Cutting-Edge Crypto Coins Tout Stability. Critics Call Them Dangerous.

A new breed of cryptocurrencies is seeking to replicate the stability of the dollar. But critics say they are a disaster waiting to happen.

So-called "algorithmic stablecoins" have surged in popularity in recent months, spurring debate over whether they are good for the crypto industry. They are the edgy upstart sibling of conventional stablecoins-digital currencies that seek to maintain a one-to-one relationship with a traditional currency, usually the dollar.


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04-19-22 0633ET