Le Pen shadow looms despite new highs
|US markets are punching higher as they play catch up from yesterday’s holiday. With Le Pen’s support growing, will we continue to see a European-US divergence for stocks?
- US outperforms European markets
- Le Pen support drives European risk aversion
- OPEC Sec.Gen sparks rally amid talk of rise to output cut
The bulls are back in charge in the US, with the divergence between US and European stock markets widening once more. Heightened political fears in Europe, ranging from Le Pen’s resurgence, to Brexit, stand in stark contrast to the overwhelming expectation of greater prosperity under Trump’s rule in the US. With US markets spiking to new all-time highs, it is simply a case of holding on for the ride as we seek to find out just how high US stocks can go.
The French elections are becoming an increasingly relevant risk to markets, with the chances of a victory for Le Pen rising with every month that passes. As the spread between French and German 10-year bond yields rises to a 4-year high, it is clear that the markets are increasingly factoring in a Le Pen victory as a distinct possibility. However, if there is anything we have learnt from polls in the UK and US, it is that the more controversial option can often be underrepresented up until the vote.
Crude prices have been a big mover today, following speculative comments from OPEC Secretary General Mohammad Barkindo, who expects the output cut compliance to not only be sustained, but built upon. Whilst the US has been gradually increasing output, the news that we could see further nations join in on trimming production has seen WTI rise to the second highest intraday price for 19-months.
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