LONDON After "Merkozy" and even "Merkhollande", the latest two-headed beast to join the European political menagerie is born today: "Emmangelina". That is what some (well okay, The Economist) are already calling the duo of Angela Merkel and Emmanuel Macron as the newly sworn-in French president heads to Berlin for his first foreign trip and a chance to discuss the future of the EU.
If Merkel's ties with Nicolas Sarkozy were largely shaped by the sovereign debt crisis they had to deal with, her subsequent dealings with Francois Hollande were less intense but largely fruitless. The hope invested in the Merkel-Macron duo is enormous and the post-Brexit stakes for the bloc could not be higher.
Merkel will come to this afternoon's talks fresh from this weekend's stunning state election win for her conservative CDU party in the traditional left-wing bastion of North-Rhine-Westphalia, and with a German economy firing on all cylinders.
Initial comments from the Macron camp meanwhile suggest the new leader will acknowledge that further progress on European issues is dependent, or at least should go hand in hand, with efforts to reform the French economy. That at least should create a warm atmosphere in Berlin but for Merkel, the proof of the pudding will be in the eating: she has seen French promises of reform fizzle in the past.
MARKETS AT 0655 GMT
Brent crude stars first thing after a 1.5-percent surge as high as $51.69 as both Saudi and Russian officials signal an extension of oil supply cuts to next March.
The bounceback in oil comes at an important time for inflation-watchers as year-on-year base effects start to flatten out and the sustainability of this rebound into the May 25 OPEC meeting will now be key. But after a welter of potentially big impulses over the weekend, most other world markets are remarkably calm again this Monday – speaking yet again to the low-volatility financial world that’s dominated the thinking of the past few week.
The mass hack of global computer systems appears not to have hit finance and markets in any major way – with obvious anxiety of damage to vital systems and commerce offset by some talk of it being a spur to corporate re-investment in computing and software upgrades akin to the Y2K scare.
On the political front, North Korea’s latest missile test on Sunday similarly has had very little direct impact on market pricing, with the South Korean won a touch weaker but Seoul’s Kospi blue chip index ending in the black.
MSCI’s Asia ExJapan index and the broader MSCI emerging markets equity index both hit new two-year highs. Dollar/yen nudged 0.1 percent higher.
The surprise win for German Chancellor Angela Merkel’s conservatives in Sunday’s elections for the country’s most populous state North Rhine Westphalia will likely be read as a stabiliser for European markets as it is likely to be seen increasing her chances of retaining the top job in Germany after nationwide elections in September. Ten-year German bund yields ticked higher in early trading, with euro zone stocks expected to open about 0.4 percent higher. Euro/dollar was firmer above $1.0930.
On the economic front, 10-year U.S. Treasury yields steadied after a 6-basis-point slide on Friday on the back of sub-forecast U.S. retail and inflation readings for April. The S&P500 closed 0.14 percent lower on Friday, with the ViX implied volatility gauge still subdued below 10.5 percent and index futures pointing to a modest rebound in stocks later today.
Below-forecast Chinese industrial output and urban investment readings for April, meantime, were offset by a faster-than-expected 10.7 percent annual expansion in retail sales there during the month. Shanghai and HK stocks closed higher.
(Editing by Andrew Heavens)