Europe
Market reaction to Emmanuel Macron’s victory over the weekend has definitely been a case of buy the rumour and sell the news, with the euro unable to build on the gains of last two weeks and the CAC40 slipping back after initially opening higher.
While the sense of relief is palpable amongst European leaders, markets have moved on and shifted their focus to the likelihood that the new French president will be able to enact his reform program, one of which is to pledge to reduce unemployment to 7%, a level only seen once in the last 30 years, at the beginning of 2008.
Even if his party does well in next month’s French assembly elections, getting a majority is likely to be a tall order. Looking at the votes cast gives a sense of the scale of the task, with Mr Macron getting over 20m votes, while Marine Le Pen got just over 10m.
What was more telling was the number of votes that were spoiled or abstained which came to 15m, which brings a total of 25m voters who didn’t like, or didn’t care for the new presidents vision for France.
It’s been a little more mixed for the rest of Europe with the DAX also slipping back a touch while the FTSE100 has shrugged off some weaker than expected China trade data which has seen the basic resource sector remain on the back foot.
Another slide in Iron ore prices has weighed on this sector, hitting their lowest levels since October last year, sending Antofagasta (LON:ANTO), Glencore (LON:GLEN) and Anglo American (LON:AAL) to the bottom of the FTSE100.
Intercontinental Hotels Group (LON:IHG) has continued its downward slide from Friday after the announcement that CEO Richard Solomons said he would step down in June.
Energy companies are the best performing sector, shrugging off concerns about price caps after Centrica (LON:CNA) announced it would be cutting 1,500 jobs, but remained on track to meet its full year guidance in 2017.
US
Despite initially opening at another record high today, US markets slipped back as investors took a rather relaxed view to the weekend confirmation of an Emmanuel Macron win to the French Presidency.
All in all the focus is now shifting back to the timing of the next Federal Reserve policy move after Friday’s payrolls numbers. While St. Louis Fed President James Bullard adopted a rather dovish tone in his remarks Cleveland Fed President Loretta Mester, a renowned hawk remained confident in the ability of the US economy to absorb a tighter monetary policy.
In-company M&A news luxury fashion house Coach Inc (NYSE:COH) signed an agreement to acquire designer brand Kate Spade in a deal worth $2.4bn.
FX
The US dollar has had a fairly decent start to the week, after last Friday's payrolls report, rebounding from 5 month lows against a basket of currencies.
The euro, having opened above the 1.1000 area for the first time November was unable to hang onto those gains sliding back sharply as traders shifted their attention back to the economic problems facing the French economy, as well as the likelihood that the ECB might look at tapering monetary policy before the end of the year.
While it is compelling to think that an improving economy could increase the pressure on the ECB to ease up on the monetary stimulus, the prospect of an upcoming Italian election early next year could well complicate matters in that regard, which may mean that optimism could well be misplaced.
The Swiss Franc is the worst performer as safe haven capital outflows prompt a sharp selloff.
Commodities
A disappointing China imports number in April sent copper prices to a four month low, while iron ore prices also came under pressure, as pessimism over future demand continued to weigh on prices. The latest imports data showed a drop of 30% month on month.
Speculation that OPEC and non OPEC members are considering extending the output freeze into 2018 has failed to materially lift oil prices as we start a new week, despite Friday’s late rebound. Another increase in US rig counts merely serves to highlight the scale of the task for OPEC in trying to underpin prices. If markets thought that getting an agreement for the remainder of the year was likely to be a big ask, then extending it into next year is likely to invite further scepticism.
Disclaimer: CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.