Crypto News: 5 things to start your day: Europe

Good morning. The UK goes to the polls. Speculation mounts over President Biden's future. And French markets brace for a second round of voting. Here's what people are talking about.

The UK votes today to decide whether Labour Party leader Keir Starmer can end 14 years of opposition and win the keys to 10 Downing Street, or whether Prime Minister Rishi Sunak can buck the polls and claim what would be an extraordinary turnaround victory. Pollsters say the question is less about a Labour win than the scale of it. Starmer's party has led the Conservatives by more than 20 points through the six-week election campaign, according to Bloomberg's poll of polls. Every so-called MRP survey of the campaign — seen as the gold standard analysis technique — pointed to a Labour majority in the House of Commons, ranging from 162 to 382 seats. All bar the lowest of the potential outcomes would see Labour win more seats under Starmer than in Tony Blair's 1997 landslide victory.

The red-hot Washington debate over whether President Joe Biden will scrap his run for re-election is spilling into Wall Street, where traders are shifting money to and from the dollar, Treasuries and other assets that would be affected by Donald Trump's return to office. The recalibration of portfolios kicked off at the end of last week after Biden's disastrous debate with Trump heightened concerns the Democrat is too old at 81 to serve another term. The drumbeat of pressure on Biden to drop out intensified Wednesday with a bombshell report in the New York Times that he had conceded the possibility to a key ally, as well as movement within his own party to demand his withdrawal. The White House quickly denied the Times report, suggesting the president had vocalized to a supporter that he could ill-afford another misstep. And while Vice President Kamala Harris has long been written off by many fellow Democrats, party members are suddenly seeing her in a new light.

France's last bond sale before a final election round will show how investors are grappling with the uncertainty of a vote that has roiled markets and triggered concerns for the nation's finances. The Treasury will seek to raise as much as €10.5 billion ($11.3 billion) from four bonds, know as OATs, with maturities of up to 40 years. In recognition of current volatility, the sale's target size was cautiously reduced to the smallest this year to drum up support. The sale comes against the backdrop of far-right leader Marine Le Pen lashing out at President Emmanuel Macron's centrist group and a left-wing alliance for joining forces to block her National Rally party from getting an absolute majority. Macron's group, the left-wing New Popular Front and other parties opposed to the National Rally strategically pulled 223 candidates out of constituencies with more than two people in Sunday's runoff vote in an effort to avoid splitting opposition to the far right. For more on the French bond market, read Ven Ram's musings below.

Recent data on inflation and economic expansion reinforce arguments for additional interest-rate reductions by the European Central Bank, with two more this year about right, according to Governing Council member Yannis Stournaras. "These data strengthen the case for further cuts a little bit," the Greek central-bank chief said in an interview. "For the moment, two more rate cuts this year seems reasonable and consistent with our forecasts. We're in highly restrictive territory and will continue to be even if we have two more cuts this year." US Treasuries rebounded overnight, meantime, after weaker-than-anticipated reports on service-sector and labor-market activity boosted the potential for Federal Reserve easing.

Ukrainian President Volodymyr Zelenskiy said Donald Trump should come forward with his plan to quickly end the war with Russia, warning that any proposal must avoid violating the nation's sovereignty. The former US president has boasted that he would end the war by the time he's inaugurated in January. "If Trump knows how to finish this war, he should tell us today," Zelenskiy said. His comments came as President Vladimir Putin trumpeted Russia's "fully-fledged partnership" with China. Putin met Chinese counterpart Xi Jinping for the second time in less than two months, highlighting Moscow's deepening embrace of Beijing. Russo-Chinese ties "are at their best in history," Putin said.

Data to watch today include Germany May factory orders and the June HCOB construction PMI.

This is what's caught our eye over the past 24 hours.

JPMorgan's Kolanovic to exit amid string of poor stock calls
Deutsche Bank's co-head of Americas ECM left amid investigation
Endeavour mining to replace Smurfit Kappa in FTSE 100 Index
Newsom shocks California politics by scrapping crime measure
Three numbers will reveal if war over Taiwan is near: Minxin Pei
PwC is struggling in China with an exodus of clients and staff
LeBron James cements billionaire status with record contract

A favorable political outcome this weekend would put battered French bonds on course for a mild rally as value investors pounce on one of the highest currency-hedged yields from a still-highly rated security.

French 10-year bonds offer a yield of 3.25%, but dollar-based investors who decide to hedge the underlying currency exposure to the euro can lock in a return around 5%. That puts France in the category of lesser-rated economies such as Spain, Portugal, Italy and Greece, illustrating that OATs are already trading at a considerable discount. The analysis suggests that real-money investors — who often favor holding their investments to maturity — will decide that current valuations on France adequately reflect the risk of any fiscal profligacy.

About a month ago, S&P Global Ratings slashed France to a AA- rating from AA with a stable outlook. That outlook implies a low likelihood of another imminent downgrade. The current yield on France, therefore, represents a risk-reward asymmetricity, with bonds already pricing much of the worst outcome, but with a more pronounced upside should those risks not materialize.

Of course, the second round of voting has the potential to unleash a fresh wave of volatility. Should it emerge that Marine Le Pen's far-right party has won an outright majority, the markets will convulse on the prospect that the government could spend more. But the two dominant scenarios looming large are a hung parliament or the lack of an outright majority for the far right. Either outcome will mean that any proposal that will cause the deficit to spiral further is less likely to pass the National Assembly — which would assuage the market's worst fears.

All told, France's bonds offer a compelling currency-hedged pick-up that puts them in good stead should the second round of voting prove to be less intimidating than the markets had reckoned in the immediate aftermath of President Emmanuel Macron's call for a snap election.

Ven Ram is a cross-asset strategist for Bloomberg's Markets Live.