Stocks in Paris rallied as European markets turned broadly higher. The Cac is up 0.5 per cent this morning with the Dax following suit and the FTSE 100, which got its boost on Friday, a little further behind. The euro gapped lower at the open on Sunday night but has rallied a bit since and has remained above the 200-day line, which it broke above last week. Franco-German spreads came in a touch but have not reverted to where they were before the European elections. Politics is really hard to price, it seems.
The election has not clarified anything, but, gridlock may be better than anything too showy for now, but only since it contains costly spending plans by left or right…there is no tackling France’s fragile fiscal position under whatever unsustainable and unsteady coalition eventually tries to govern. It’s what I refer to as ‘ungovernance’ – a result of inept policymaking, a fractured electorate and greater polarisation.
How can anyone govern a country with 246 varieties of cheese? Charles de Gaulle’s frustration with the ungovernable French rings true today. The left alliance now has the most seats – what will that mean for governing a country that seems to have ‘postponed’ the hard right’s victory? The decision to call the snap election has done anything but clarify things for France and President Emmanuel Macron. Expect a lot more chaos as the situation moves on.
Elsewhere, markets have little data to go on today and we are still digesting the payrolls report from Friday, which showed more weakness in the US labour market. Unemployment ticked up to 4.1 per cent and revisions were soft. I spy weakness. For instance, there were big downward revisions in April and May, plus the share of people unemployed for longer than 15 weeks rose to its highest since the pandemic. Softer labour market indicators have helped push the dollar lower along with Treasury yields. DXY futures have crept back to their lowest in almost a month.
For everything else you need to know this week, click here
The Trader is written by Neil Wilson, chief market analyst at Finalto
