IFR Euro Outlook: Quarter-end atop France elections, escalating Israel/Hezbollah tensions

...Today, however, will quite possibly be less about the data, and more about 1) month-end, 2) quarter-end, and 3) squaring up before the first round of French elections Sunday.

Month-end is relatively straight forward with the market traditionally supported by index extension flows as the day wears on. Even if Bunds put in a poor showing, the typical pattern is for a late rally from those tied by their charters to act at the last possible moment.

Quarter-end meanwhile typically sees reduced participation as accounts close their books, impinging upon liquidity and making for exaggerated price action. It also brings portfolio rebalancing, with the S&P 500 setting a record high a week ago, and up about 4.5% quarter-to-date, while the Sep 10-year future is slightly lower over the same period, one would expect at least a bit of risk-off price action as funds shift out of shares into fixed income.

It's a similar picture for Bunds and the Eurostoxx complex, at least as far as the 50 and the 600 go.

Regarding the French elections, we suspect pre-election nerves are more likely to rule...