Investors already look beyond first-round French election relief
Repeats July 1 story without change
French markets rally on Monday but far from recovery
Focus turns to policy instability with hung parliament in sight
France could face another election in a year - investors
By Yoruk Bahceli and Samuel Indyk
July 1 (Reuters) -Investors are sceptical that the relief rally after France's first-round parliamentary election can last, wary that the outlook for the country's creaking public finances will remain in focus with several political hurdles ahead.
The closely-watched spread French government bonds pay over Germany's DE10FR10=RR retreated from a 12-year high on Monday and bank shares surgedas Marine Le Pen's National Rally (RN) scored a win smaller than some polls had expected on Sunday.
The results lessen the chance of an absolute majority for the RN, or a win for the left-wing alliance that came second, and were a relief for markets rattled since the surprise election was called last month.
But investors remained cautious with uncertainty high ahead of a second-round vote on July 7 and beyond, seeing little scope for improvement in France's weak fiscal position as both the far-right and left have pledged big spending increases.
"It would be too premature to say the battle is over," said Nicolas Forest, CIO at asset manager Candriam.
"We are at the beginning of a new political era in France and the situation will stay very uncertain and very complicated."
Even after Monday's bounce, French assets have barely recovered. France's 10-year yield FR10YT=RR rose to its highest since November on Monday. The French/German bond spread is still over 25 basis points wider than before President Emmanuel Macron called the election on June 9 and not expected to recover any time soon. Shares in France's three biggest lenders are still down 7-12%%.
Underweight French debt, Forest saw scope for the French-German spread to widen to 100 bps even with a hung parliament, where no one party has an outright majority.
The first hurdle is Sunday's second round election.
Leaders of the left-wing alliance and Macron's centrist grouping have indicated they would withdraw their own candidates in districts where another candidate was better placed to beat the RN.
But it was unclear if the pact would always apply if the left-wing candidates were from Jean-Luc Melenchon's far-left France Unbowed party.
Candidates through to the run-off have until Tuesday to decide whether to run or stand down.High turnout on Sunday means France is heading for a record number of three-way run-offs, which are expected to benefit the RN.
"Anything that would increase support for the far-right parties would be the biggest risk from here," said Colin Finlayson, co-manager of the Aegon Strategic Bond Fund.
TURMOIL AHEAD
An uncertain political environment adds to worries about the long-term challenges for France's stretched finances that saw its credit rating downgraded in May.
With a budget deficit rising to 5.5% of output last year, far higher than European Union rules permit, France faces disciplinary measures from the EU executive.
Given big spending pledges from the RN as well as the left-wing alliance, "it's difficult to see how you're going to get much through parliament that says reduce spending," said David Zahn, head of European fixed income at Franklin Templeton, who remains underweight French debt.
"This is a sea change for France, (the spread) will now have to trade wider because of its fiscal dynamics, its political dynamics."
The RN has toned down some of its more radical plans and said it would respect the EU's fiscal rules, but it's unclear how much of its plans are funded.
Investors were considering scenarios including ones where legislation is passed on a bill-by-bill basis or Macron tries building a broad majority that would still face instability.
RN leader Jordan Bardella has said he only wants to be Prime Minister if it won an absolute majority.
"If no one gets an absolute majority, you always end up in a situation where you have a government which will have to cobble up together all the time, very complex arrangements across political families which don't have a habit of working together," said AXA's chief economist Gilles Moec.
That raises the risk of another election after 12 months, when they are permitted again, investors said, meaning uncertainty persisting.
"It will be really uncharted territory for France," said Candriam's Forest. "It will stay unstable, this government cannot stay for more than one year."
The risk premium on French debt has surged on election fears The risk premium on French debt has surged on election fears https://reut.rs/4eLamyf
Vote share in first round results of France's parliamentary election Vote share in first round results of France's parliamentary election https://reut.rs/3RQuaXh
Reporting by Yoruk Bahceli and Samuel Indyk; editing by Dhara Ranasinghe and David Evans
متعلقہ اثاثے
تازہ ترين خبريں
دستبرداری: XM Group کے ادارے ہماری آن لائن تجارت کی سہولت تک صرف عملدرآمد کی خدمت اور رسائی مہیا کرتے ہیں، کسی شخص کو ویب سائٹ پر یا اس کے ذریعے دستیاب کانٹینٹ کو دیکھنے اور/یا استعمال کرنے کی اجازت دیتا ہے، اس پر تبدیل یا توسیع کا ارادہ نہیں ہے ، اور نہ ہی یہ تبدیل ہوتا ہے یا اس پر وسعت کریں۔ اس طرح کی رسائی اور استعمال ہمیشہ مشروط ہوتا ہے: (i) شرائط و ضوابط؛ (ii) خطرہ انتباہات؛ اور (iii) مکمل دستبرداری۔ لہذا اس طرح کے مواد کو عام معلومات سے زیادہ کے طور پر فراہم کیا جاتا ہے۔ خاص طور پر، براہ کرم آگاہ رہیں کہ ہماری آن لائن تجارت کی سہولت کے مندرجات نہ تو کوئی درخواست ہے، اور نہ ہی فنانشل مارکیٹ میں کوئی لین دین داخل کرنے کی پیش کش ہے۔ کسی بھی فنانشل مارکیٹ میں تجارت میں آپ کے سرمائے کے لئے ایک خاص سطح کا خطرہ ہوتا ہے۔
ہماری آن لائن تجارتی سہولت پر شائع ہونے والے تمام مٹیریل کا مقصد صرف تعلیمی/معلوماتی مقاصد کے لئے ہے، اور اس میں شامل نہیں ہے — اور نہ ہی اسے فنانشل، سرمایہ کاری ٹیکس یا تجارتی مشورے اور سفارشات؛ یا ہماری تجارتی قیمتوں کا ریکارڈ؛ یا کسی بھی فنانشل انسٹرومنٹ میں لین دین کی پیشکش؛ یا اسکے لئے مانگ؛ یا غیر متنازعہ مالی تشہیرات پر مشتمل سمجھا جانا چاہئے۔
کوئی تھرڈ پارٹی کانٹینٹ، نیز XM کے ذریعہ تیار کردہ کانٹینٹ، جیسے: راۓ، خبریں، تحقیق، تجزیہ، قیمتیں اور دیگر معلومات یا اس ویب سائٹ پر مشتمل تھرڈ پارٹی کے سائٹس کے لنکس کو "جیسے ہے" کی بنیاد پر فراہم کیا جاتا ہے، عام مارکیٹ کی تفسیر کے طور پر، اور سرمایہ کاری کے مشورے کو تشکیل نہ دیں۔ اس حد تک کہ کسی بھی کانٹینٹ کو سرمایہ کاری کی تحقیقات کے طور پر سمجھا جاتا ہے، آپ کو نوٹ کرنا اور قبول کرنا ہوگا کہ یہ کانٹینٹ سرمایہ کاری کی تحقیق کی آزادی کو فروغ دینے کے لئے ڈیزائن کردہ قانونی تقاضوں کے مطابق نہیں ہے اور تیار نہیں کیا گیا ہے، اسی طرح، اس پر غور کیا جائے گا بطور متعلقہ قوانین اور ضوابط کے تحت مارکیٹنگ مواصلات۔ براہ کرم یقینی بنائیں کہ آپ غیر آزاد سرمایہ کاری سے متعلق ہماری اطلاع کو پڑھ اور سمجھ چکے ہیں۔ مذکورہ بالا معلومات کے بارے میں تحقیق اور رسک وارننگ ، جس تک رسائی یہاں حاصل کی جا سکتی ہے۔