Emmanuel Macron not only dissolved the National Assembly on June 9, but also the presidential majority. Because unsurprisingly, the National Rally (RN) emerged victorious in the first round of the early legislative elections in France, marked by high participation, with 34% of the vote, according to OpinionWay estimates.
The RN, led by the Marine Le Pen-Jordan Bardella duo, and its allies are ahead of the left alliance, which has 28% of the votes, and the presidential coalition, at 22%. The far-right party is not far from obtaining a majority of the seats of deputies, but everything will depend on the configurations of the second round next Sunday (between agreements and possible withdrawals which will transform triangulars into duels). At this stage, polling institutes, such as Elabe and OpinionWay, do not rule out the possibility that the RN and its allies reach 289 seats, synonymous with an absolute majority. For others, they could only obtain a relative majority.
« We are a little in this uncertainty, but we are relieved that the RN result was not worse. “, said Fiona Cincotta, a market analyst at City Index. Investors fear that a victory for the National Rally (and even more so for the New Popular Front, but that scenario is now obsolete) would increase the chances of an expansionary fiscal policy, which would heavily burden the already ailing public finances. If calls to block the RN find resonance, French markets should recover, according to Kathleen Brooks, research director at XTB. ” A hung parliament could make it difficult to get anything done in France in the next legislature, which is exactly what the markets want ” she believes.
The Paris Stock Exchange is expected to rise and not just a little. Cac 40 futures are up nearly 3%, which should allow the flagship index to erase its losses from last week. The euro is up against the dollar and French sovereign yields are relatively stable.
Political news will remain in the spotlight throughout the week, but several statistics will still try to get people talking about them. The monthly US employment report should arrive there easily on Friday. This Monday, the manufacturing sector activity indices for the month of June will be available. But this is “only” the final estimate which will be published at 10 a.m. in the euro zone. More importantly, investors will learn at 2 p.m. the first estimate of German inflation in June, expected to fall slightly to 2.5% year-on-year for the index harmonized with European standards.
