April 18, 2017 / 7:22 AM / 9 months ago

Daily Briefing: Race to Elysee wide open

LONDON (Reuters) - With less than a week to go before the first round of France's presidential election, it's pretty much anyone's guess who will be the two candidates to make it into the runoff two weeks later.

Pollster Elabe's survey released yesterday has barely six points between the four front-runners, with centrist Emmanuel Macron just one point ahead of far-right Marine Le Pen.

On top of that are the abnormally high levels of voter indecision still being registered in a race where no candidate has captured the imagination of even a significant minority of the public. The last week’s campaigning, and who can motivate their supporters to actually turn out to vote, will be crucial.

Sweden has got a problem many would envy: falling levels of debt have meant there are not enough bonds around to make them easy for investors to trade. Finance Minister Magdalena Andersson has just told Reuters one option could be to issue more paper and set up a sovereign wealth fund with the proceeds.

Moreover the new budget shows that its economy will grow faster than expected in the next two years, leaving room to boost spending on welfare, schools and the police. Not bad for the ruling centre-left coalition a year before the 2018 election.


After a week of some intensity in geopolitics from North Korea to Syria as well as electoral tensions in Turkey and France, the net impact on global markets shows up mostly in bonds – where 10-year U.S. Treasury yields have shed almost 10 basis points to fall to their lowest since November 17. While these have stabilised overnight after a decent post-Easter rally in U.S. stocks of almost 1 percent, the bid for safety at the margins is clear.

Marine Le Pen, French National Front (FN) political party leader and candidate for French 2017 presidential election, reacts at the end of her campaign rally in Paris, France, April 17, 2017. REUTERS/Pascal Rossignol

That said, the overall effect on equity has been pretty limited, with MSCI’s world index little changed from where it ended the week before last. Some of that has been due to the holidays across many major markets, but it’s also due to ongoing strength of many incoming economic numbers – not least Monday’s release of the above-forecast first-quarter Chinese growth numbers of 6.9 percent.

The release later on Tuesday of the IMF’s latest World Economic Outlook will put some context on the ongoing global recovery. The start of the first-quarter U.S. earnings season is also helping to buoy stocks, with Goldman Sachs due to report later on Tuesday.

For the dollar, it’s been more of a rollercoaster. Geopolitical tensions, such as North Korea’s failed missile launch and threats of a nuclear standoff with the United States, would in the past have been seen as a boon for the greenback, but the dollar is been buffeted by what seems like a "good cop/bad cop" routine by U.S. President Trump and his Treasury Secretary Mnuchin.

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Trump’s broadside last week against the detrimental effects of an overly strong dollar on U.S. trade have since been countered by Mnuchin saying a strong dollar over the longer term was good for the U.S. economy.

The upshot is a weaker dollar over the past week, with euro/dollar testing $1.0650 in early trading today compared with a low of $1.0568 a little over a week ago. Dollar/yen is slightly firmer overnight back above 109/$, but over a yen weaker over the week too. Brent crude has weakened a touch over recent sessions too, but retains the $55 handle.

There was little reaction in Turkish markets to the narrow victory for Turkey’s President Erdogan in Sunday’s constitutional reform referendum bolstering the power of the role of the presidency in the country.

French markets are bracing for next weekend’s first round of the presidential vote there, with two-year French/German debt spreads nudging out wider in advance even though the polls still broadly favour a win for centrist Macron over the two rounds of the election.

Asia stocks ended lower earlier despite Wall St’s bounce and European stocks are marked slightly lower too.

Editing by Tom Heneghan

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