Stocks rebound as political fears are brushed aside

European stocks are rebounding this afternoon, despite the ongoing risks associated with the elections in the UK and France and the situation surrounding North Korea.

  • Stocks in the green despite ongoing political risks
  • French election unlikely to cause upset
  • Feds Kaplan highlights potential for more dovish Fed

Stocks are on the rebound this afternoon, with the FTSE managing to creep back into positive territory after a testing two days. It’s often said that markets do not like uncertainty, yet the rise we have seen in the pound in the wake of Theresa May’s spectacular election u-turn suggests traders are largely taking this one in their stride for now. Despite the impending French election and heightened aggression between the US and North Korea, it is clear that markets largely see these threats as fleeting and superficial.

The stability we have seen in the markets today is a clear nod to the blasé outlook that the trading community is holding with regards to this weekend’s French election. The first round is widely expected to result in a toss-up between Le Pen and Macron, but most expect voters to team up against Le Pen in the second round. The threat of an upset seems likely to be negated by the structure of the French democratic system.

Federal Reserve voting member Robert Kaplan gave a clue that perhaps the US central bank will be more accommodative in the eventuality that Trump’s policy promises do not come to fruition. Kaplan said that a further two rate hikes this year represents a good baseline, but he also said this could be ramped up or slowed down. This is surely an attempt to respond to what has been a somewhat stop-start beginning for Trump’s Presidency. With Trump’s healthcare bill rejected in Congress, there is a distinct chance we could see the widely heralded tax reforms also rebuffed, impacting on the Fed’s economic and thus monetary outlook.

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