Better to be ungovernable than to have an absolute majority in Le Pen. It was already clear that this was the opinion of the markets the day after the first round of the elections French elections. But the mood is confirmed today with the European stock exchanges all on the rise after the outcome of the ballot which, surprisingly, delivered the victory of the New Popular Front, relegating Rassemblement National to third place, next Ensemble by Emmanuel Macron.
On the stock market, however, the lion's share is not Paris, but... Milano, which records the best performance of the old continent driven by the banks, increasingly brilliant due to the continuous speculation on banking risk.
Stock market 8 July: Paris rises after the elections, fears about the next budget law
Spotlight on Paris, up 0,4% despite the election outcome which left the country with a divided parliament and the prospect of arduous negotiations to form a government. “It is not yet clear what government might emerge and how stable it would be. The main conclusion is that the Parliament is deeply divided, which will introduce uncertainty on the political situation in the short term", is the comment of the Equita experts, who like everyone else speak of "a surprise result” with “French voters” “turning to the left”. The markets, in fact, had predicted a "suspended" parliament with the Rassemblement National in the lead, not the Nouveau Front Populaire (NFP): "Extreme outcomes have been avoided and, from a European point of view, this result is probably the closest possible to maintain the current situation, but the prospects remain, in our opinion, complex". Any government – the reasoning goes – “will be financially constrained by the current budget (5,5% deficit) and the left-wing alliance cannot govern without the support of center deputies”. Certainly, “a step backwards on pension reform would be a negative signal for the markets”. And with a “suspended” government led by the left, “the markets could witness a increased political uncertainty”, concludes Equita. On a general level, analysts from various institutes were surprised by the French electoral result which saw the left of the New Popular Front prevail, but they do not fear the arrival of a "rainbow" coalition, but rather see some future risks that could manifest themselves in the presentation of the next one Budget law in autumn. “We remain mildly positive in the short term. We believe that the biggest problems for France (and for Europe) may arrive in the autumn when the Assembly will have to approve the budget law", comments Filippo Diodovich, Senior Market Strategist of IG Italia.
Stock market 8 July: price lists in green, Milan runs with the banks
After the +2,5% achieved last week, in the middle of the session the Ftse Eb it gains 0,8% to 34.258 driven by the performance of the banking system, with the sub-index of the sector recording +1,83%.
The other price lists are further away. Goes up 0,43% Frankfurt where Delivery Hero sank by 6,7% after the announcement of the huge fine of 400 million euros that the company risks having to pay for its potential violations of EU antitrust rules. They follow Amsterdam (+ 0,3%) and Madrid (+0,25%), while outside the EU London marks +0,25% in the first days of the new government led by Labor Party Keir Starmer.
From a macro perspective, the investor morale in the euro zone it recorded a larger-than-expected decline in July, interrupting an eight-month streak of increases. This is what emerges from the survey Sentix, describing the results as a bitter setback.” For the euro zone, the index actually fell to -7,3 points in July from 0,3 in June, putting the barometer firmly back in the red. The expectations index also recorded a decline, falling to 1,5 in July from 10,0 in June. “The recent recovery of the European economy has come to an abrupt end,” Sentix said, highlighting investor concerns over the French election, upcoming regional elections in Germany and uncertainty over the U.S. presidential election in November . The German economy, the largest in Europe, also saw a collapse in morale in July, with the current situation index falling to -32,3 from -26,3 in June. The decline follows three consecutive months of gains.
In Milan, banks are running, driven by risk speculation
After the initial uncertainty, Milan has taken the path of increases, driven by the banks which are traveling in a clear upward trend in the wake of the speculations circulating on the M&A scenarios that could involve Ps (+3,74%), awaiting the Treasury's moves on the remaining share of capital still in public hands, Bper (+5%) and the Popular of Sondrio (+2,76%). Also on the rise Banca Mediolanum (+ 2,4%), FinecoBank (+2,3%, +9% in four sessions) e Intesa Sanpaolo (+ 1,6%).
The automotive sector was positive with Ferrari (+ 2,17%) and Iveco (+2%) celebrating the 230 million euro agreement for the supply of light vehicles to the Brazilian army signed on Friday. Purchase on Poste Italiane (+ 1,67%).
At the end of the list we find instead Amplifon (-1,77%) And Diasorin (-1,51%). Energy stocks are doing badly in the wake of the fall in raw material prices, with Saipem (-1,33%), Erg (-1,25%), Terna (-0,68%). Tenaris ed Eni they lost 0,59% and 0,48% respectively.
Outside the Ftse Mib runs Fincantieri (+6,1%) influenced by the rush of the construction sector in France, where analysts expect politics to provide a greater push for investments in infrastructure.
Spreads and yields fall after the French elections
The outcome of the French vote also affects the spread, with the differential between the 138-year BTP and the Bund standing at 141 basis points from 62 on Friday. The spread between French ten-year government bonds and those of the same duration in Germany fell to 66 basis points (from 20). Frederic Leroux, member of Carmignac's Strategic Investment Committee believes that the Oat/Bund spread is "destined to rise gradually, increasing the cost of French debt and contributing to the weakening of the national economy". On equity markets, “although less than 40% of the Cac XNUMX's earnings are generated in France, it is possible that asset allocations in France will be permanently reduced.”
Moving on to the secondary level, the performance of the BTP ten-year benchmark is at 3,92% from 3,94% three days ago, the one onOat 10 drops to 3,16%, the one on Waist drops to 2,54%.
The other markets
On the currency, theeuro it rose slightly to 1,083 on the dollar. Prices are moving significantly lower Petroleum, with Brent expiring in September below 86 dollars a barrel (at 85,7 dollars, -0,9%) and the WTI in August at 82,18 dollars (-1,18%). Prices rose to 33,3 euros per megawatt hour gas.
