MARKET’S REACTION TO MACRON

Last night and this morning there was a fanfare of metaphorical trumpets to greet Emmanuel Macron as the new ‘Little Corporal’ to take up residence at the Elysee Palace this coming Sunday. Depending on your age group, as a ‘matinee idol eat your heart out, Clark Gable, Paul Newman or Ryan Gosling! ’We were told Macron offered hope rather than hatred. I hope so. However in our heart of hearts we all know that nothing has changed or will change despite a crushing victory over Le Pen 66-34%’. France remains deeply divided coupled with 11.5% of the votes cast either blank or soiled. Macron will know he is in a battle if he cannot get his new party – ‘en marche’ or a coalition cobbled together in the June legislative elections. I suspect it will be ‘plus can change!’ Many have tried before him. France is the most conservative country in the world and it loathes change.

 

Such was the expectation that Macron would win that the CAC rallied by 7% and the DAX by 8% in the last two weeks prior to the election. After the news of his victory the Euro hardly moved a cent (E1.0971). French bond yields eased by a few notches. However during the morning and early afternoon the relief gains the CAC and DAX had made were surrendered and now they stand in negative territory – -0.78% and -0.14% respectively. 

 

Macron and Merkel will start to feel very confident as their strut their stuff around the world stage. Macron will be keen to make his mark as a European by showing dissent and opposition to BREXIT. He knows full well that unemployment in France is 9.6% with Germany’s at 3.9% and UK’S at 4.7%.  So he will need to set his stall down internationally before he deals with France’s perennial issues.  Clearing and repatriation of banking are in his sights.  He was in the UK a month ago and his spin has not gone unnoticed over the ‘clearing’ service the last week. There will be waves but London will remain unbowed. 

 

President Elect Macron is in danger of being Chancellor Merkel’s poodle. So he needs to show his colours right off the bat as EU innovator.  The EU remains very fragmented – the Franco/German juggernaut, the rest of the EU and the UK. The possibilities of uniting the EU for a protracted period of time are remote – so first impressions will be vital. It is interesting to note that the new President feels that immigration and security will just disappear over the yardarm at the drop of a hat!

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