Still mostly sticking to the plan
After a cacophony of political noise, central bankers were again the ones to really strike a chord with capital markets last week. Britain’s political parties unveiled their manifestos and French President Macron shocked everyone with a surprise election call – causing fairly significant market consternation – but it was an updated interest rate forecast from the US Federal Reserve (Fed) that turned out to be the key driver of markets. The Fed signalled it would cut interest rates just once this year, disappointing those who were betting on two cuts. This was called “hawkish” by the media, but we think “bullish” is probably more appropriate. It was more about recognising economic strength than a preference for higher rates.
Macron makes an educated bet
We wrote last week about elections upsetting markets and preached calm. But during the past week saw surging support for far-right parties at the European parliament elections, and a surprise snap election call from French President Macron, resulting in a significant sell-off in European assets. When it rains, it pours.
European Commission president Ursula von der Leyen’s centre-right bloc ultimately won the most votes and seats in European parliamentary voting, but exit polls showed a record number of seats going to far-right or Eurosceptic parties. The surge was particularly stark in France, where Marine Le Pen’s National Rally (RN) party won the largest share of votes and parliamentary seats – with Macron’s pro-European list a distant second, barely ahead of the third-placed socialists.