How can anyone govern a country with 246 varieties of cheese? Charles de Gaulle’s frustration with the “ungovernable” French rings true today.
The Republican front held — but is that really democracy? With the results of the French election second round in, the hard-left alliance now has the most seats in the National Assembly – 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.
Stocks in Paris rallied — the CAC 40 index was up 0.53% at the time of writing — as European markets turned broadly higher. Germany’s DAX index was up 0.6% while the EURO STOXX 50 gained 0.7%.
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. EURUSD traded around the $1.0840 mark as of 09:40 GMT.
Franco-German spreads came in a touch but have not reverted to where they were before the European Parliament elections. Politics is really hard to price.
The French election has not clarified anything, but political gridlock may be better than anything too showy for now, but only because 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 referred to a couple of years ago as “ungovernance” – a result of inept policymaking, a fractured electorate, and greater polarisation.
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% and revisions were soft. There may be weakness here — 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.
Dollar index futures have crept back to their lowest in almost a month.
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