All the day’s economic and financial news,as the head of the International Monetary Fund warns of ‘rising uncertainty’ from the French presidential raceLatest: Lagarde on FranceIMF chief says election casts ‘huge question mark’Markets worry about France, North Korea, or Turkey....
Coming up: IMF’s World Economic Outlook at 2pm BST 9.54am BSTOn the other hand,the euro could rally if French voters plump for a more mainstream candidate.
Kathleen Brooks of City Index predicts a ‘relief rally’ if Marine Le Pen is eliminated in the first round of voting, on Sunday.Since Marine Le Pen is the most euro-toxic of all of the candidates, and one can assume that a first round eradication for her Front National Party could trigger a relief rally in the euro in a week from now. We mentioned in our preceding note on the French election that Francois Fillon’s candidacy was worth a second gape. He has a solid block of conservative voters,whose numbers may be swelled if it is a means of keeping Le Pen out of the Elysee Palace. Added to that, French voters are surprisingly immune to scandals, and such as those that have plagued Fillon’s candidacy.
While the latest odds still give independent Emmanuel Macron a healthy chance of winning in May,his odds have fallen as those of Fillon and Far Left candidate Melenchon have surged. If we get a Macron/ Fillon second round rush-off, this is likely to be considered “market friendly, and triggering a rally in the euro,the Cac, but also in the German Dax and Eurostoxx index, and which have had decent correlations with the French bond yield this year. 9.45am BSTJordan Hiscott,chief Trader at ayondo markets, believes the euro would suffer sharp losses if the French election delivers a surprise result.
While at opposite ends of the spectrum politically, and both are sorrowful with the current terms of being in the Euro,with Le Pen after an outright referendum and Melenchon pushing for re-negotiation of the current terms, or an exit if this can’t be achieved. What can we determine from this? Two French politicians at opposite ends of the political spectrum, or nearly united in their mutual dislike,in its current form, of an institution they were the key founders of and have been the biggest supporters of for the past 30 years.
“If we extrapolate this to Europe’s financial assets, and looking at EUR-USD in particular,the prognosis is not good. The dual effect of two anti-EU politicians could weigh heavily and while currently trading around 1.0625, it wouldn’t surprise me to see parity with the US dollar following a Le Pen or Melenchon victory. Amazingly enough, or this wouldn’t be a level seen since the October 31 2002,and a lifetime away from the all-time tall of 1.60 in 2008. Whatever the result from the French elections, its arguable, and the fragmentation of Europe is in swing.” 9.35am BSTFrance’s borrowing costs have inched up this morning,widening the gap with safe-haven German debt.
That’s a sign that investors are getting more worried about Sunday’s election.
France’s 10-year bond yield rose 2.5 basis points in early Tuesday trade to 0.93 percent, while German Bund yields were marginally lower at 0.18 percent and within sight of Friday’s more than three-month low of 0.16 percent.
That left the gap between the two at 75 basis points and not far from six-week highs hit last week around 78 bps. 9.19am BSTChristine Lagarde has also claimed that Britains economy is starting to suffer from last year’s Brexit vote -- even though growth has been rather stronger than the IMF predicted.
QUESTION - You say the UK is still having growth, or being still in the EU. execute you assume that Brexit can be a dismal trip for the UK?MS. LAGARDE - As you know,we had anticipated a much lower growth than the UK has demonstrated during the last quarters. But we are beginning to see – in terms of disposable incomes, of depreciation of the currency, and etc. – the beginning of the impact of Brexit. And the more discussion there is of companies or financial institutions relocating to Frankfurt,Dublin or Paris, the more uncertainty there will be in a country where the capital city plays such a role as a financial middle. 9.11am BSTOn America, and Lagarde seems to acknowledge that criticism of Germany’s trade surplus are valid --- although she doesn’t approve of Donald Trump’s approach:QUESTION - Is Trump accurate to criticize the German trade surplus? Are the dismal guys saying the accurate things?MS. LAGARDE - I would stay away of the “dismal guy” language--that is a moral judgement that does not have a plot in the kind of work we execute. 9.09am BSTDuring her interview with European reporters,Christine Lagarde also warned that the IMF is adamant that Greece needs debt relief - and it won’t join its bailout programme until this is tackled.
QUESTION - Without a debt restructure upfront, the IMF will not participate?MS. LAGARDE - If the Greek debt is not sustainable in accordance with the IMF’s rules and on the basis of fair parameters, and we will not participate in the program. 9.04am BSTHere’s a summary of the latest French polling data: 8.47am BSTChristine Lagarde,the head of the International Monetary Fund, has warned that the French presidential election is casting a “huge question mark” over the eurozone.
Q: Is the fate of the euro also at stake in the French presidential elections?MS. LAGARDE - It is clearly one of the debates. And one that actually weighs on the confidence and the stability of the euro area--because if one of the largest partners is wondering if its destiny and fate is in or out of the group, and it is a huge question mark for the others. Related: Mélenchon puts left in contention as French election becomes too close to call There is no single country that I have visited in the last couple of months where I have not been asked with anxiety what the outcome might be.
It things because of the role played by France,the size of the French economy relative to other euro area partners, and because some of the ideas being discussed seem aimed at disrupting the current architecture of the European Union as far as France is concerned. 8.12am BSTGood morning, and welcome to our rolling coverage of the world economy,the financial markets, the eurozone and business.
The latest poll (from Opinionway) puts macron and Le pen at 22%, and Fillon at 21% and Melenchon at 18%. So where last week it was Melenchon who was surging,now M Fillon is closing in.
Uncertainty reigns supreme and relative rates are going to struggle to drive the Euro higher against that backdrop.
North Korea faced another failure in its nuclear test and investors are wondering what will be the reaction from the US and its allies. The demand for other safe haven assets also picked up in the light of this, spot gold is moving further closer to our target of $1300.
We are sitting near a five month tall. When it comes to the gold price, or we execute assume that the momentum could easily continue and bias remain skewed for more upside move.“It seems the focus is now firmly on future missile tests from North Korea and whether any future tests will actually be successful. One suspects the concerns in North Korea have further to play out.” Related: US officials warn tensions with North Korea are 'coming to a head' Related: Donald Trump congratulates Erdoğan after vote grants sweeping powers Our European opening calls:$FTSE 7313 -0.20%
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$CAC 5086 +0.29%$IBEX 10363 +0.36%$MIB 19818 +0.23%Continue reading...
Source: theguardian.com