UTOR: TYLER DURDEN
Written by Elwin de Groot, manager of Macroeconomic strategy at Rabobank
Before the weekend before the European session there was 1 more day left, but already now it is promising for the week of fast decisions in which the bond marketplace was "saved" by inflation figures in the US, and Macro could ask for papal blessing. But if that's enough, we'll find out.
Macron bet on gambling... and lost?
According to the latest polls only 40% of Macron MPs would have obtained adequate support to qualify for the second circular of elections at all.
The surprise decision of the French president was to announce the election last Sunday.
Macron could have acted rapidly after the results of the European Parliament elections in the hope that he would be able to sail on a fear-inspired wave of solidarity that would halt the National Assembly Marine Le Pen.
However, this decision could have the other effect.
According to Elabe/Les Echos poll support for Macron has fallen to the lowest level since 5.5 years.
Macron appealed to voters and more average political parties from both the left and the right to not succumb to the "extreme fever", but it is not known, If his strategy succeeds.
The leftist parties decided equally rapidly to unite, creating a common agenda and a common list of Green candidates, Socialists, Communists, and inflexible France.
The Socialist organization released a message yesterday stating that "the anticipation of unification was expressed"; but evidently not the unity that Macro was looking for.
This fast decision could just cut Macro down. This means that the centre Members of the president can be pushed out of parliament by competition on the left and right sides of the rate.
Center fever?Finance Minister Le Maire predicted early this week that France would face a debt crisis if the National Unity came to power. This suggests that Macron's strategy is primarily to sow fear and that the situation must deteriorate before it improves.
However, there seems to be very small time for Macron's second leg of strategy: improvement. Sometimes fast decisions aren't always the best decisions.
Macron's European colleagues seemed stunned by the G7 gathering in Italy. According to press reports, Macron only met with Canadian Prime Minister Trudeau, as well as with Algerian leaders, India and Brazil. And the Pope. 1 might wonder whether he asked for a short prayer, or whether he wanted a papal blessing.
It seems that political uncertainty in France has evolved into a classical risk-off sentiment.
The search for safe havens was 1 of the reasons why the profitability of the 10-year-old Bunds fell by 6 bps yesterday.
However, the spread between the profitability of the 10-year French and German bonds has widened to the highest level since April 2017.
At the same time, the euro fell below 1,073 and European shares were down (Eurostox 50 - 2%).
Prayer or blessing, it definitely didn't calm the investors.
However, safe assets in both the US and Germany have besides found any support in better than expected inflation data.
Both the primary inflation and the underlying PPI in the US were importantly lower than expectations, which confirmed us that inflationary force had yet begun to weaken.
The profitability of the 2-year government bonds has fallen to the lowest level since 4 April, despite Fed correcting his scoring illustration to reflect 1 alternatively than 3 interest rate cuts this year and despite Powell's reluctance to adopt the latest CPI report.
Faster decisions. In any event, the possible of further responses following the elections in France, political uncertainty in Europe and possible re-election The Trump may be forcing faster decisions.
G7 leaders agree to grant Ukraine a $50 billion loan.
The agreement reached on the first day of the G7 summit in Italy.
G7 leaders rapidly agreed to a debt that is secured by frozen Russian assets.
The proceeds from these assets (estimated in Europe at around $260 billion) will be allocated to repay the debt to Ukraine.
How notes AP News, associate States can treat this differently depending on national preferences/regulations.
However, lenders are of course at hazard that these revenues will be stopped if a peace agreement is reached and Russian assets are in future Freezing.
The EU has announced additional duties on Chinese electrical vehicles.
This is another fast decision after the investigation of unfair state subsidies, which will enter into force with small delay.
The EU announced this week additional duties on Chinese electrical vehicles ranging from 17 to 38%, which will enter into force on 4 July.
Germany seems to hope that there is inactive area for negotiation before the Chinese duties are raised, but French Le Maire praised the European Commission's decision to rise import duties on Chinese cars: "This is the first decision I hope to follow, especially on solar panels and another Chinese overcapacity." However, as my colleague joked yesterday, the imposition of duties on Chinese solar panels is a decade late.
This shows, however, that the French government is ready to "restor the balance of power with China".
Data show that European manufacture is inactive struggling: industrial production in the euro area decreased by 0.1% in April. Although it was not a large decrease, it was inactive weaker than expected (+0.2% m/m). With revisions down earlier data, yearly dynamics fell to -3% y/y.
This is inactive a clear sign of a "recession" and stresses that the economical recovery in the euro area is inactive unstable, with structural problems in the manufacturing and export sectors and a weak request from China (for example, Chinese imports from Germany fell by 14% in May compared to 0% in April).
The Bank of Japan needs a small more time for a exit strategy.
The overnight call rate remained unchanged from 0.0% to 0.1%. Political decision-makers voted to proceed the current acquisition of assets for the July gathering despite the governor's earlier signals Uedy that there may be a simplification in bond acquisition programmes.
At its next meeting, the central bank will present a plan to limit the acquisition of bonds over the next 1-2 years.
At the Ueda press conference, he stated that the simplification in the acquisition of bonds would be significant.
But not all decisions can be quick.
The central bank will take account of possible marketplace distortions if decision-makers take besides hasty action.
The Bank will not want to introduce excessive volatility on the JGB market, given the possible impact on the balance sheets of large nipponese insurers and in the light of its own immense national bond stocks.
However, slow movement will proceed to weigh on the currency.
The marketplace expected any adjustments today, so the postponement of the decision for next period caused further weakening of JPY. USD/JPY increased above 158.
Translated by Google Translator
source:https://www.zerohedge.com/
