July 1, 2024
CURRENCIES
French election outcomes:
- The right-wing National Rally (NR) party secured nearly 34% of the vote.
- The left-wing New Popular Front garnered just over 28%.
- President Macron’s alliance came third with around 21%.
- NR is close to the 289 seats needed to form a government but is projected to fall short by about 10 seats in the second round.
Market response:
- Both the Euro and CAC 40 started the week strong.
- CAC 40 rose by 2.5%, now at 7,685, yet still below the May 10th peak of 8,262.
- The Euro increased, but further gains may be limited before next week’s elections.
- EUR/USD is trading around 1.0765, near a three-week high.
Market conditions:
- Anticipated tactical voting in France could heighten CAC 40 volatility.
- Important upcoming US data, particularly Friday’s US Jobs Report (NFP), will impact EUR/USD movements.
Trader sentiment:
- Retail trader data indicates 50.39% of traders are net-long.
- The ratio of long to short traders is 1.02 to 1.
- The number of net-long traders decreased by 10.75% since yesterday and 25.08% since last week.
- Net-short traders increased by 21.60% since yesterday and 30.87% since last week.
- A contrarian view suggests EUR/USD might fall, but recent sentiment shifts hint at a potential upward reversal despite current net-long positions.
STOCK MARKET
Market reaction:
- European stocks and the euro surged on speculation that Marine Le Pen’s far-right party will struggle to secure an outright majority in the French elections, reducing investor concerns about a radical policy shift in France.
Election impact:
- France’s CAC 40 Index jumped 2.8%, the largest gain since November 2022, as Le Pen’s National Rally led President Macron’s centrist alliance by a smaller margin than expected.
- The Euro reached its strongest level since mid-June.
- The yield spread between French 10-year bonds and German bonds narrowed, indicating reduced risk perceptions.
Market performance:
- Europe’s Stoxx 600 Index rose by 1%, with banking stocks leading the gains.
- Societe Generale SA, BNP Paribas SA, and Credit Agricole SA surged over 5%.
- US equity futures trimmed earlier gains.
Market sentiment:
- Investors showed relief as neither far-right nor far-left parties are expected to implement extreme policies.
Corporate news:
- Boeing Co. agreed to buy back Spirit AeroSystems Holdings Inc. for $37.25 per share in an all-stock deal.
- The US Justice Department will charge Boeing with criminal fraud.
US economic data:
- Indicators suggest the US economy is cooling without lasting consumer damage.
- US consumer sentiment declined less than expected, with inflationary pressures predicted to moderate.
- Treasury 10-year notes showed little change.
Global market dynamics:
- The South African rand led gains among emerging market currencies after President Cyril Ramaphosa announced a new business-friendly cabinet.
- Oil prices edged higher amidst economic and geopolitical assessments.
- Iron ore prices rose on signs of recovery in China’s property market and potential further support from Beijing.
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