Daily update
Daily update
- The first round of the French elections produced results broadly in line with opinion polls (as to the popular vote). An unusually large number of second-round votes could be three-way contests. That makes the final outcome harder to predict. In the past, there has been a “front républicain” with third-placed moderate candidates withdrawing to increase the chances of defeating a more extreme party (in this election, the Rassemblement National). It is not clear how many constituencies will follow such a strategy.
- It now seems less likely that one group will have a majority after the second round, but investors would be unwise to place too much confidence in that. A weaker minority government is unlikely to tackle France’s fiscal situation (although a Truss-style crisis can probably be avoided). The elections remind investors that economic structural upheaval encourages prejudice politics, and this will be more evident in more countries.
- German preliminary June consumer price inflation is expected to slow. Eurozone inflation is within a reasonable range of the target, and so this moderation in headline inflation supports more easing from the ECB.
- Several business sentiment opinion polls are due. Consumer sentiment polls are subject to political partisan bias; it would be naïve to suppose that business sentiment polls are somehow immune.
