Live Markets: The Barnier effect

Elis SA

06/09/2024 10:58

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      STOXX 600 down 0.3%
    

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      Focus on nonfarm payrolls
    

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      Oil, mining stocks lag
    

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      Wall St futures lower
    

  
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    THE BARNIER EFFECT 
    Investors breathed a small sigh of relief on Thursday after French President Emmanuel Macron
named EU's former chief Brexit negotiator Michel Barnier as prime minister. Bank stocks rose, 
bonds ticked up and the euro nudged higher.
    Still, French stocks are underperforming broader European markets, particularly the bank
stocks, while worries about the fiscal outlook have kept government bonds under pressure.
    Barnier faces the daunting challenge of steering tough legislation like the 2025 budget
through a hung parliament as well as propose measures to fill a shortfall in this year's budget.
    "Since Barnier is likely to have only minority support in the Assembly — the 166 Macronist
deputies, plus 47 from the centre right and a few independents — it is unclear how he can
resolve these twin fiscal crises," said Mujtaba Rahman, managing director for Europe at Eurasia
Group.
    Christopher Granville, managing director for global political research at TS Lombard thinks
Barnier's experience and skills will help at the margin.  
    "This points to a substantial retracement in Q4 of the OAT-Bund spread blow-out," said
Granville.
    The risk premium investors demand to hold French debt over German fell slightly to 69 basis
points on Thursday. It surged briefly in June to 85 bps, its highest since 2012, following
Macron's decision to call a shock snap election.
    Citi economists said they expect a "thin" legislative agenda and a fiscal policy focused on
'damage mitigation' rather than consolidation.
    "Political instability and policy opacity likely remain prevalent, which may still weigh on
consumer and investor confidence," they added. 
  
    (Sruthi Shankar)
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    FRIDAY'S OTHER LIVE MARKETS POSTS:
    STOXX 600 FALLS BEFORE PAYROLLS TEST CLICK HERE
    EUROPEAN FUTURES SLIP BEFORE HOTLY ANTICIPATED JOBS REPORT CLICK HERE
        ALL ABOUT THEM PAYROLLS CLICK HERE
    

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Brent crude oil price in USD per barrel    https://reut.rs/3TlxM4q
The beleaguered yen has started bouncing back    https://reut.rs/3zasVfj
European shares fall before U.S. payrolls test    https://reut.rs/3Xh1ZT7
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