French stocks lead the way as fears of a Far-Right majority ease

Posted by Joshua Mahony -
Scope Markets
  • French stocks lead as parties wrangle to avoid Far-Right majority
  • UK election unlikely to throw up a curveball
  • US jobs in focus, with ADP payrolls expected to decline

European equities are enjoying a strong start in Europe, with the French CAC pushing sharply higher amid growing confidence that the political wrangling underway in advance of this weekend’s vote will avoid a majority for Le Pen’s National Rally. With President Emmanuel Macron’s centrist group and a left-wing alliance withdrawing candidates to minimize the number of three-way contests that might split the anti Far-Right vote, we have seen French yields head lower and stocks on the rise. With a hung parliament providing the basis for Macron to continue calling the shots, the market perception of a Le Pen victory comes down to the ability to achieve a majority or not. 

Tomorrows UK election looks unlikely to create too many shockwaves given the sheer size of the majority expected for the Labour party. While Reform have been busy chipping away at the Conservative vote, recent scandals will have likely stifled support with two candidates defecting due to perceived racism within the party. For traders, the prospect of a stable Labour majority appears to be a positive, with sterling one of the best performing currencies over the past week.

Looking ahead, the US jobs market remains in focus, coming off the back of yesterday’s JOLTS job openings figure which saw an unexpected rise counteracted by a downside revision to the May reading. With traders expecting a decline in Friday’s non-farm payrolls release, today’s ADP figure looks to similarly head lower in a sign of weakness in the employment picture. The weakness seen for the dollar yesterday came off the back of comments from Powell, with the data dependent nature of the Fed being seen as a positive given the weakness expected in the jobs data this week. Nonetheless, traders will be concerned over the inflationary impact of the recent rise in crude oil, with yesterday’s rise pushing WTI through $84 for the first time since April.

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