Europe
It’s been a fairly quiet session for Europe’s markets today with the CAC 40 taking centre stage and moving higher on the belief that Emmanuel Macron will make it into the final vote this weekend, and as such win the French presidency in a run-off with one or the other of Marine Le Pen or Jean-Luc Mélenchon, neither of whom are viewed as particularly market friendly.
While this is the most likely outcome it ignores the fact that Mélenchon has recent momentum in his favour, and Emmanuel Macron remains largely untested as a politician of substance. It also ignores the fact that even if Macron were to win, without any party framework to speak of, he would be ill-equipped to deliver anything like some of the promises he’s made on the campaign trail. Ultimately he would be a lame duck president, albeit a market friendly one.
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.
Today’s price action would also suggest that markets appear to be ruling out any possibility that Macron could miss out and that Le Pen and Mélenchon might make it through to the final round.
Given recent events, while this isn’t a likely outcome it is still a possibility and shouldn’t be ruled out entirely. If it did happen the market reaction would in all likelihood be ugly, with a sharp drop in the euro as well as the stock market.
Even though the FTSE 100 has hit its lowest levels this year it has found some support just above 7,080, while the DAX has also struggled to move significantly in either direction.
Amongst the biggest decliners, equipment rental company Ashtead Group PLC (LON:AHT) has slipped back sharply as expectations about a US infrastructure boom diminish along with a disappointing read across from US sector peer United Rentals Inc (NYSE:URI) who saw profits fall short of expectations by 2%.
Ex-dividend pressure was weighing on Barratt Developments PLC (LON:BDEV) and Smurfit Kappa Group Plc (LON:SKG) while on the other side of the ledger Unilever PLC (LON:ULVR), recently subject to an abortive bid from Kraft Heinz Co (NASDAQ:KHC) reported Q1 numbers that appeared to please investors.
The dividend was raised by 12% with underlying sales growing 2.9% in the latest quarter as margins improved despite lower volumes.
US
After two days of declines US markets opened higher as investors continue to play the recent range.
The latest weekly jobless claims data came in close to market expectations at 244k, up from last week’s 234k, while the latest April Philadelphia Fed survey softened slightly from March’s 32.8, but was still a pretty healthy 22.
Companies in focus included telecoms provider Verizon Communications Inc (NYSE:VZ) who saw Q1 profits come in at $0.95c a share, slightly below consensus with revenues also coming in short.
Bank earnings continued to come in better than expected with American Express Company (NYSE:AXP) reporting profits of $1.34c a share, well above expectations with revenues also better than expected as card spending show increases in consumer spending.
Equipment rental company United Rentals still a showed quarterly profit of $1.63c a share which was above estimates, however rental rates were showing some signs of softness reflecting the prospect that demand for plant and equipment might be starting to tail off.
FX
The US dollar has slipped back after the rebound seen yesterday which suggests that the greenback remains under pressure from reduced expectations about the future path of US rate rises.
The euro has managed to find some support on the expectation that Emmanuel Macron will make it into the final round of the French presidential elections, when voting concludes this weekend, moving to its highest level against the EUR/USD this month.
The pound has remained relatively steady throughout the day finding support around 1.2780 ahead of comments from Bank of England governor Mark Carney later this evening, and March retail sales data tomorrow.
Commodities
Oil prices have continued to struggle despite further noises about a potential extension to the current production freeze beyond the current June deadline amongst OPEC members. While this is all well and good it is hard to see how this will be any more successful than the last one unless non-OPEC members like Russia come on board, and that’s before you even consider US shale producers who continue to bring new rigs on line at an increasing weekly rate.
Copper prices appear to have found some level of support after hitting their lowest levels this year earlier this week, as some light profit taking kicks in, after the declines of the last couple of weeks.