The CAC is showing little movement in the Wednesday session. Currently, the index is trading at 5,277. It’s another quiet day on the release front, as there are no German or Eurozone indicators on the schedule.
Overshadowed by the French election, the ECB holds a policy meeting on Thursday. No surprises are expected from the cautious central bank. The benchmark rate will likely remain at a flat 0.0%,where it has been pegged since March 2016. With the eurozone showing stronger inflation and growth numbers in the first quarter, there had been speculation that the ECB might taper its asset-purchase program or wind up the program earlier than December. However, the ECB appears in no rush to make any monetary moves, particularly with the current French election and the German election in September.
European stock markets jumped on the weekend, reacting with a thumbs-up to the outcome of the French presidential election. The CEC has also jumped on the bandwagon and remains close to 8-year highs. French voters will have a crystal-clear choice between the two final candidates, who want to take France in very different directions. Emmanuel Macron served as a minister under President Francois Hollande. He favors deregulation and is a staunch supporter of the European Union. Marie Le Pen, who heads the National Front, has campaigned on a ‘France first’ platform, vowing to curb immigration and take France out of the eurozone. Hollande and Francois Fillon, who ran in the first round, have thrown their support behind Macron and asked voters to reject ‘extremism’. Macron is a heavy favorite to win the second round and become president, with polls giving him a comfortable lead of above 60%. Since opinion polls were accurate ahead of the first round of voting, the markets appear to relying on the current polls as well, meaning that the markets have priced in a Macron victory. Unless this sentiment drastically changes during the week, the election will be a non-event for the market. At the same time, nothing is a sure thing in politics, as underscored by the Brexit vote and the election of Donald Trump, two events which stunned the markets and triggered strong market movement.
Will the lights stay on in Washington this weekend? President Trump will have to punch in some overtime this week to avoid a shutdown of the federal government on Saturday. Congress must pass a spending bill which will fund the government until October, but the bill requires the backing of 60 senators. This means that the Republicans (who control 52 seats) will need the support of 8 Democrats. This has led to intensive bipartisan negotiations, and it’s reasonable to expect that these talks could go down to the wire, as both sides try to stick to their positions and try not to blink first. The last shutdown was in 2013, lasting 17 days. Another shutdown would be embarrassing for Trump, as it would start on his 100th day in office and would cast doubts on his ability to push his budget and tax plan through Congress.
