A Look at the Day Ahead in European and Global Markets from Ankur Banerjee
European markets are set for a strong start to the second half of the year after the first round of voting in France placed the far-right National Rally (RN) party in the lead, albeit with a smaller share than some polls had predicted, pushing the euro to a two-week high.
Exit polls, aligning with opinion surveys, showed Marine Le Pen’s RN party securing around 34% of the vote in the first round, comfortably ahead of leftist and centrist competitors.
However, the likelihood of the eurosceptic, anti-immigrant RN party winning power next week remains uncertain. It will hinge on the political negotiations by its rivals in the coming days, with intense dealmaking already underway.
The better-than-expected results buoyed the euro, which reached a two-week peak of $1.076175. Stock futures climbed by 1%, and French OAT (bond) futures rose by 0.12%.
The broader French market is likely to see a boost, particularly as the blue-chip CAC 40 index has dropped 6% since French President Emmanuel Macron dissolved parliament.
Analysts caution that the week may still be volatile, as the RN could secure a majority in next Sunday’s runoff.
Traders and markets are worried that both the far-right and the left-wing alliance, which came second on Sunday, have pledged significant spending increases. This is concerning at a time when France’s high budget deficit has led the EU to recommend disciplinary measures.
Beyond France, the UK is gearing up for its general elections on Thursday, with the opposition Labour Party expected to win by a landslide.
While sterling has fluctuated in June, dropping nearly 1% over the month, the currency’s future depends on the next government convincing cautious investors that its plans to revive a stagnant economy are credible.
Key Developments That Could Influence Markets on Monday:
- Economic Events: Germany’s June inflation, PMI data for June from the euro zone, and Germany.
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