Macron Calls Snap Parliamentary Elections After EU Vote Defeat

Macron’s decision for snap elections following an EU vote defeat has caused market reactions and investor concerns about potential far-right gains. Broader market implications are expected as investors await further economic data and central bank decisions.

Phoebe Roy

Jun 10, 2024 - 13:15

Jun 10, 2024 - 14:36

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Macron Calls Snap Parliamentary Elections After EU Vote Defeat

French President Emmanuel Macron called for snap parliamentary elections later this month after suffering a significant defeat in the EU vote. This decision has created a major stir in the French political landscape.

Impact on Financial Markets

France’s CAC 40 index dropped 1.6% following the announcement. Shares of French banks, particularly Societe Generale and BNP Paribas, fell 7.8% and 4.7%, respectively, due to concerns over potential interventionist economic policies from the far-right National Rally party.

Analyst Concerns

Morningstar equity analyst Johann Scholtz highlighted fears of interventionist policies, noting that banks in many European jurisdictions have become targets for populist measures. The wider spread of French government bonds post-election has also negatively impacted French banks, indicating increased risk aversion among investors.

Political Implications

Potential Gains for National Rally

Political analysts suggest Macron's move could lead to significant gains for the National Rally party, potentially giving it substantial influence over domestic and economic policy. However, the likelihood of National Rally securing an outright majority is uncertain, with the most probable outcome being another hung parliament or coalition government for Macron.

Barclays' Perspective

Barclays strategists pointed out that the snap French election, rather than far-right gains in the European Parliament, unsettled the market. They emphasized that National Rally achieving an outright majority is unlikely.

Broader Market Reactions

U.S. Inflation Data and Federal Reserve Meeting

Investors are also focusing on upcoming U.S. inflation data and the next Federal Reserve meeting. A stronger-than-expected U.S. jobs report last Friday indicated that the Fed is not in a hurry to lower interest rates, with no rate cuts expected at its meetings this week or in July.

Asia-Pacific Markets Mixed

Overnight, Asia-Pacific markets showed mixed results, with some markets closed for a holiday, reflecting uncertainty in response to current global economic and political developments.

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Phoebe Roy I pay close attention to all kinds of data and research that tell us about the health of the Global economy, what’s going on with workers and businesses, and how they’re affected by public policy. To understand what that means on the ground, I often travel to meet people where they are, whether it’s the scene of a recent forest fire or a university contending with shrinking enrollment. While most of my work is explanatory, I also consider it part of my job to expose wrongdoing and hold power to account.