The political landscape in Europe will be in focus following weekend events in France and the Netherlands. The first round of the French presidential elections held Sunday confirmed that the two front-runners, President Nicolas Sarkozy and opposition candidate Francois Hollande will go on to the second round. The preliminary results showed Hollande ahead with 28.8% of the votes, compared with Sarkozy’s 26.1%. If elected, Hollande will call for the renegotiation of the European treaty on fiscal discipline.

And in the Netherlands, early elections look likely, following the collapse of budget talks.

Meanwhile, traders note a degree of caution ahead of meetings by the Bank of Japan and the Federal Open Market committee late in the week, both of which could announce new easing measures.