Thu, May 26, 2022 @ 16:54 GMT
HomeContributorsFundamental AnalysisMarket Update - European Session: The French Presidential Election And Solidified His...

Market Update – European Session: The French Presidential Election And Solidified His Prospects Of Becoming The Country’s Next Leader

Mid-Market Update: Relief rally as Macron won the 1st round voting in the French presidential election and solidified his prospects of becoming the country’s next leader

Notes/Observations

France Presidential election moves to the 2nd round with Macron (Centrist) faces Le Pen (Far Right) settting the stage for a runoff that would pit Globalism vs. Nationalism

Relief rally underway as Macron solidified his prospects of becoming the country’s next leader

German Apr IFO Business Climate Survey beats expectations to highest level since summer 2011 (112.9 v 112.4e)

Overnight/Weekend:

France Election Results:

Macron 23.75%; Le Pen 21.53% (both move onto 2nd round that held on Sunday, May 7th)

Macron:

Will seek to build Parliament majority as soon as Monday (Apr 24th)

Wants to relaunch European project and break with a system unable to address France’s problems

Have changed French politics over the course of one year

Le Pen:

Election result is historical

Time to free French people from the arrogant elite

Calls on all patriots to back her as survival of France is at stake

Fillon:

Conceded defeat

Will vote for Macron and Le Pen would lead to failure of France

Melenchon:

Will not endorse any candidate for 2nd round

Asia:

PBOC Gov Zhou: China’s 2017 GDP target is "within reach"; Financial risks were under control. Reiterated PBoC to keep pursuing a prudent and neutral monetary policy.

China Fin Min Xiao Jie: confident in reaching GDP target as global economic recovery and market sentiment were improving

China President Xi reiterates his call on all sides to exercise restraint on North Korea during a recent phone conversation with President Trump. Hoped all sides avoid doing anything to worsen tense situation on Korean peninsula

Japan Fin MIn Aso: Trade imbalances could not be fixed through FX adjustments alone. Unclear what immediate results would be from US/Japan dialogue talks, possible some results on energy and train infrastructure but no guarantees for US in any bilateral deal with Japan

Europe:

ECB’s Nowotny (Austria): Any change to policy will be considered in H2. Have decided on its interest rate and bond purchases for the remainder of the year; Any changes to its policy path beyond 2017 will be considered in H2

EU to tighten guidance on Brexit bill, guidelines expected to be finalized during week of Apr 24th

IMF Members Steering Committee Statement said to exclude anti-protectionism pledge, adopted G20 language on trade. Members pledged to refrain from competitive devaluations; would not target exchange rates for competitive purposes

Germany Fin Min Schaeuble: board consensus has not changed at G20 meeting in Washington

Greece Fin Min Tsakalotossaid to be aiming for Eurogroup Finance Ministers to sign off on staff-level agreement of 2nd review of current bailout program at upcoming May 22 meeting – Fitch cuts Italy sovereign rating one notch to BBB from BBB+; outlook Stable from Negative; cites fiscal slippage and weak bank sector

Americas:

Office Management & Budget (OMB) Director Mulvaney: a short-term stopgap funding bill is more likely than a govt shutdown. White House will offer specific governing principles for its tax plans this week together with indications of what new rates would be but complete proposal won’t be ready till June

Energy:

Weekly Baker Hughes US Rig Count: 857 v 847 w/w (+1.2%) (14th straight weekly rise)

Economic Data

(SG) Singapore Mar CPI M/M: 0.0% v 0.0%e; Y/Y: 0.7% v 0.7%e; CPI Core Y/Y: 1.2% v 1.2%e

(CZ) Czech Apr Business Confidence: 14.3 v 13.1 prior; Consumer Confidence: 6.0 v 6.3 prior

(TW) Taiwan Mar Industrial Production Y/Y: 3.2% v 6.0%e

(DE) Germany Apr IFO Business Climate: 112.9 v 112.4e (highest since July 2011); Current Assessment: 121.1 v 119.2, Expectations Survey: 105.2 v 105.9e

Fixed Income Issuance:

(PH) Philippines sold total PHP15B vs. PHP 15B indicated in 3-month, 6-month and 12-month Bills

(KR) South Korea Central Bank sold KRW900B v KRW 900B indicated in 3-month Monetary Stabilization Bonds (SMB); Avg yield: 1.34% v 1.34% prior

(NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 6-month Bills;Avg Yield: 0.47% v 0.50% prior; Bid-to-cover: 3.55x v 2.15x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 +3.9% at 3,579, FTSE +1.9% at 7,246, DAX +2.9% at 12,394, CAC-40 +4.6% at 5,292, IBEX-35 +3.4% at 10,730, FTSE MIB +4.0% at 20,530, SMI +1.5% at 8,684, S&P 500 Futures +1.1%]

Market Focal Points/Key Themes: European equity indices are trading sharply higher as risk-on prevails after the first round of French elections showed Macron the front runner to be the next French President; Banking stocks trading sharply higher as a result with French banks SocGen and BNP Paribas leading the gains in large volume in the Eurostoxx; CAC 40 outperforming the board as a result; shares of LafargeHolcim the one notable laggard in the index after announcing executive changes; Banking shares Barclays and Standard Chartered leading the gains in the FTSE 100; energy, commodity and mining stocks also trading higher as copper and oil prices trade higher intraday; German IFO results beating consensus expectations adding to risk-on sentiment.

Upcoming scheduled US earnings (pre-market) include Halliburton, Hasbro, Illinois Tool Works, Kimberly-Clark, Lennox International, Nustar Energy, Precision Drilling, and TCF Financial.

Equities (as of 09:50 GMT)

Consumer Discretionary: [Jimmy Choo CHOO.UK +9.8% (to conduct review of strategic alternatives)]

Financials: [Kennedy Wilson Europe Real Estate KWE.UK +13.8% (Agrees on recommended all-share combination transaction with Kennedy-Wilson Holdings)]

Healthcare: [Koninklijke Philips PHIA.NL +3.2% (Q1 results), UCB UCB.BE -2.9% (Q1 sales)]

Industrials: [Anglo American AAL.UK +1.9% (Q1 production), Syngenta SYNN.CH +0.7% (Q1 sales)]

Materials: [LafargeHolcim LHN.CH -0.6% (confirms executive changes)]

Technology: [Computacenter CCC.UK +7.5% (Q1 sales), First Derivatives FDP.UK +1.8% (trading update)]

Telecom: [Tele2 TEL2B.SE +7.1% (Q1 results)]

Speakers

BoE’s Hogg will leave central bank at end of week

German IFO Economists noted that the domestic economy was growing strongly. Brexit was not an issue pre-occupying German business at this time. Dip in Expectation Survey mainly due to industrial sector but did not signify change in sentiment in overall economy

Turkey Econ Min Zeybekci noted there were no expectations of Cabinet changes in the short term. GDP must growth at 4.5% to keep unemployment rate constant

Russia 1st Dep PM Shuvalov: Any decisions on taxes will not go into effect before 2019

Currencies

Risk appetite was the session’s theme as there were no surprises in the French 1st round Presidential election. Centrist Emmanuel Macron and far-right politician Marine Le Pen now move on to a May 7th run-off vote that pits Globalism vs. Nationalism. Macron thus solidified his prospects of becoming the country’s next leader. Macron has led in poll by approx. 20 points in recent weeks and thus offered encouragement for the EU

The EUR/USD surged to a 5-month high during Asia to test 1.0933 as the French Presidential results likely produced the most market-friendly outcome,. Euro zone money markets saw more chance of ECB hike in early 2018 after French vote

USD/JPY benefitted from the risk-on environment to hold abovce the 110 level in the session

Fixed Income

Bund futures trade at 161.20 down 156 ticks falling sharply following the French election results which provided no surprises as well as strong IFO readings out of Germany. A break of 160.93 lows targets 160.72 followed by 160.15. Resistance moves to 162.52 gap fill followed by 162.94.

Gilt futures trade at 127.83 down 91 ticks falling on risk on flows with continued downside targeting 127.70. A reversal eyes 128.81 followed by 129.14. Short Sterling futures trade down 1 to 4bp across the curve in steepening trade with Jun17Jun18 steepening 3bp to 12.5/13bp.

Monday’s liquidity report showed Friday’s excess liquidity fell to €1.561T a fall of €7B from €1.568T prior. Use of the marginal lending facility fell to €218M from €223M prior.

Corporate issuance saw no activity on Friday rounding the week off with $23.78B coming to market. Issuance is expected to pick up as earnings ramp up during the week. In Euro denominated issuance last week saw €6.2B come to market in the 2nd lowest issuance week so far this year. For the year issuance broke the €500B mark, slightly ahead of last year. For the week ahead issuance is forecasted between €10-15B.

Looking Ahead

(DE) Germany Fin Min Schaeuble speaks at Hospitality Lobby Event, Stuttgart

(DE) German Chancellor Merkel and Ivanka Trump attend G-20 Women’s Summit in Berlin

05:30 (BE) Belgium Debt Agency (BDA) to sell €1.8-2.5B in 2023 and 2027 OLO Bonds

06:00 (UK) Apr CBI Industrial Trends Total Orders: 6e v 8 prior, Selling Prices: 27e v 29 prior, Business Optimism: 12e v 15 prior

06:00 (IL) Israel to sell 2019, 2020, 2021 2025, 2027 and 2047 bonds

06:45 (US) Daily Libor Fixing – 07:00 (PT) Portugal Feb Current Account: No est v €0.0B prior

07:00 (IN) India announces details of upcoming bond sale (held on Fridays)

07:25 (BR) Brazil Central Bank Weekly Economists Survey

07:30 (TR) Turkey Apr Real Sector Confidence (Seasonally adj): No est v 106.7 prior; Real Sector Confidence (unadj): No est v 108.1 prior

07:30 (TR) Turkey Apr Capacity Utilization: No est v 74.9% prior

08:00 (CL) Chile Mar PPI M/M: No est v -0.3% prior – 08:15 (UK) Baltic Dry Bulk Index

08:30 (US) Mar Chicago Fed National Activity Index: 0.50e v 0.34 prior

08:30 (CA) Canada Feb Wholesale Trade Sales M/M: -1.0%e v 3.3% prior

08:50 (FR) France Debt Agency (AFT) to sell combined €4.8-6.0B in 3-month, 6-month and 12-month BTF Bills

09:00 (CN) China Mar Conference Board Leading Economic Index: No est v 1.2 prior

09:00 (MX) Mexico Feb IGAE Economic Activity Index (Monthly GDP) Y/Y: 1.1%e v 3.0% prior

09:30 (EU) ECB announces Covered-Bond Purchases

09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender

10:30 (US) Apr Dallas Fed Manufacturing Activity: 17.0e v 16.9 prior

11:30 (US) Treasury to sell 3-Month and 6-month Bills

11:30 (US) Fed’s Kashkari (Dove dissenter) speaks at UCLA in Los Angeles

16:00 (US) Weekly Crop Progress Report

Trade The Newshttp://www.tradethenews.com/
All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.

Featured Analysis

Learn Forex Trading