The CAC index is unchanged in the Tuesday session. Currently, the index is at 5,270.75, up 0.07% on the day. There are no eurozone or French indicators. On Wednesday, the Eurozone releases M3 Money Supply and Private Loans.
ECB President Mario Draghi was careful to avoid the headlines on Monday, as he testified before the European Parliament Economic and Monetary Affairs Committee. Draghi was careful not to make any headlines, as he said that the ECB would remain "patient and persistent". Draghi acknowledged that there was uncertainty regarding the inflation outlook, adding that recent volatility in the exchange rate would require monitoring. Draghi remains committed to the ECB’s loose monetary policy, saying that "ample" accommodation is still needed in order to raise inflation levels. Some policymakers have come out in favor of tightening monetary policy, with the eurozone economy continuing to grow and unemployment falling. However, inflation remains well below the ECB target of just below 2 percent. Draghi told lawmakers that he is confident that the inflation target will be met, but that would require avoiding any hasty changes to current monetary policy.
European markets are digesting the results of Sunday’s German election, and although Angela Merkel won a impressive fourth term as president, the post-election picture is a murky one. Merkel’s CDU party has little to celebrate, dropping from 41% of the vote in the last election to just 33% on Sunday. The result has tarnished the image of Europe’s most powerful politician and the de facto leader of the European Union. Merkel’s most likely coalition partners, the Greens and the FDP, will be looking to extract major concessions as the price for joining a coalition as junior partners. For the time being, Europe’s iron woman will need to focus her energies on forming a workable coalition and will have to put other issues on the back burner, at a time when the European Union is locked in difficult negotiations with Britain over the terms of its departure from the EU.
Emmanuel Macron promised during the election campaign to overhaul the French economy, and the French president has signed into law a series of labor reforms in order to boost economic growth. Unsurprisingly, France’s largest unions have pledged to fight the move tooth-and-nail, and tens of thousands demonstrated in Paris on the weekend. The government has promised further reforms in unemployment benefits and pensions. Previous governments have tried to implement France’s labor laws in the past, but mass strikes and demonstrations by unions have managed to stave off major reforms. Will Macron succeed where his predecessors have failed? The new government appears determined to move full speed ahead, and the markets will be watching closely to see who prevails in this round, the unions or the government.
