Election risk helps stifle stocks

The FTSE continues to flounder ahead of the French elections, as Eurozone PMIss and UK retail sales fail to spark volatility

• Plethora of political and economic factors hold back markets

• Eurozone PMIs highlight ongoing recovery

• UK retail sales continue to deteriorate

The FTSE looks set for yet another indecisive day if early trade is anything to go by, with a veritable smorgasbord of political and economic factors to weigh up proving a little too much. Markets are now facing two key elections either side of the English Channel, a heightened stand-off between North Korea and the US, alongside a highly volatile perception of what a Trump presidency will look like. While we are no clearer on what this weekend’s French election result will be, we at least received hints from Treasury Secretary Mnuchin that the tax reform plans are now “pretty close”. The subsequent dollar and stock rally off the back of Mnuchin’s comments have largely paved the way for
 today’s trade, as traders seek to ascertain whether this is the beginning of a recovery following weakness across both sectors.

In a morning packed full of economic data, there is a clear divergence between the now consistent improvements seen in the Eurozone, and the gradual deterioration of UK data ahead of Brexit negotiations. Despite the French election, there is clearly little hesitancy for businesses in France, with both services and manufacturing sectors growing a historically impressive clips. On the flip side, the deterioration in UK retail sales saw the monthly measure contract by the second highest amount since 2012. It is worthwhile noting that while the month-on-month retail sales figures are typically volatile, the annual figure highlights that we are seeing a consistent weakness in spending which will
 undermine UK retail businesses should it persist.

Ahead of the open we expect the Dow Jones to open 17 points higher, at 20,596.