THE FRENCH PRESIDENTIAL ELECTION
The first round of the French presidential election will be held this Sunday.
Le Pen or Macron?
Source: The Economist /KAL’s cartoon this week
Latest poll suggests that Macron overtakes Le Pen in France for the first round of presidential election, but there is little difference in the voting rate between Macron and Le Penn for now.
Le Pen stands for national identity and culture, against ‘massive immigration’ and she wants France to leave the EU’s zone. and exit the euro. According to her, the European Union is a failure. On the other hand, Macron stands for globalism, equality and free movement.
Therefore, after the Paris terrorist attack on Thursday night, the probability of Le Pen’s victory could increase and this lead some investors to be cautious ahead of French vote.
Uncertainty still continues ahead of the election in France. Donald Trump also says that Paris terrorist attack will have a big effect on presidential election in France.
France 5Y CDS spread has tightened in recent days, but ahead of the political election and terrorist attack, it has increased quite a bit recently as concerns over political risk continue to dominate. Moreover, French 10 year government bonds have rallied and turned higher on Friday.
France 10 year bond yield – Yield curve
Very nice reading about the French Presidential election by Chris Bailey @financialorbit:
Will the French Presidential election hurt the value of your pension fund?
We could draw a line here and conclude it is all up in the air. But this is a column and you want an investment view. My continuing thought (as originally published here) remains that populists are not going to crash and burn global markets in 2017.
Theresa May’s statement on 18th April 2017: Britain’s Prime Minister Theresa May has called a snap general election which is needed for ‘Brexit stability’ in Britain on 8 June. If Brexit talks go well to provide political unity and the conditions necessary for economic development, it will be good for pound.
The pound climbed to a 6-month high on Tuesday while FTSE 100 suffered the worst day since Brexit. The yield on the benchmark 10 year gilts jumped after May’s speech on Tuesday.
The pound also passed through its 200-day moving average – a key resistance level – for the first time since the EU referendum last June.
ALL ABOUT POLITICS !
Nice summary here about the pound and politics from Financial Times:
According to the IMF report, there are two interesting points: the first one is, emerging markets corporate debt are under rising risk premiums and protectionism, the other one is that deflation
Oil prices fell on Friday as rising US production balanced against OPEC cuts, geopolitical risk, political instability and Chinese economy .
According to the International Energy Agency (IEA), the oil market is slowly but surely reaching a balance as a result of success of the OPEC production deal. By the way, OPEC oil production cuts continue and it seems to me that oil prices will continue to increase until the end of 2017.
Useful article here : https://www.ft.com/content/93554036-25ab-11e7-8691-d5f7e0cd0a16
Russian Energy Minister said that Russia reduced oil production by 250000 barrels daily in April as compared to its October output. They will discuss oil cut extending with OPEC on May 24.
Russia plans to increase oil production if no new agreement is reached with OPEC. Therefore, Russia’s participation in the agreement will be so essential for oil prices’ future.
This week, gold prices started to erase a loss for the week as investors seek safe-haven assets like gold after the French presidential election risk and Korean tensions.
STRONG POUND / OPTIMISM IN EURO-ZONE
Euro zone composite, services and manufacturing PMI data at 72 month high!
According to the Markit, Euro-zone PMI rose to 56.7 in April. In other words, Euro-zone business activity hit a six year high in April on strong demand. Moreover, job creation has reached to the highest for almost a decade. However, euro dips with French election in focus next week.
US 10-year bond yields dropped to lowest level since November as rising geopolitical risks. However, Trump told to the Associated Press today that he will unveil tax plan next week that includes “massive” tax cut for individuals and businesses. After that, US bond yields increased and dollar rose from 3 week-low. In addition to this, US federal reserve vice- chair sees two more US rate increases rest of 2017. This will lead dollar to be stronger than before.
Ratings agency Fitch downgraded Italy’s sovereign debt on Friday because of the country’s weak economic growth, fiscal slippage, weak government, banking problems and political risk ahead of elections due in 2018. Fitch reduced the rating to “BBB” from “BBB+”.
Source: https://www.fitchratings.com/site/pr/1022569 / @Schuldensuehner