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Market Update

Israel politician rejects proposal from Hamas, potential call for a referendum by Germany's AfD party, endorsement from DeSantis after presidential race drop-out, interest rate decisions for the PBoC, and a slow start for data this week.

Morning Round-Up

In the Middle East: There’s a lot of moving parts according to the papers…In Israel, Netanyahu has “reject[ed] outright the terms of surrender of the monsters of Hamas”. This was a proposal by Hamas to release hostages in return for an immediate ceasefire, a withdrawal of Israeli troops, and the release of Palestinian prisoners in Israel.

The US, Egypt and Qatar meanwhile are pushing both Israel and Hamas to start a phased process that would start with hostages being released and eventually lead to a withdrawal of Israeli forces. So far this isn’t being bought by Netanyahu, as he is adamant that a two state solution isn’t the answer, whereas other regional actors are.

The EU meanwhile has proposed that they set out the consequences for Israel of engaging or not engaging with their proposed peace plan. The EU doesn’t have the leverage that the US has over Israel, but it is the country’s largest trading partner, thanks in part to an association agreement that gives them preferential trade and investment benefits.

Iran has accused Israel of killing 5 Revolutionary Guard members in an airstrike on Damascus, whist it is also reported that commanders from the Revolutionary Guard are on the ground in Yemen and helping direct and oversee Houthi attacks on ships in the red Sea.

 

AfD Would Call Referendum

In Europe: Germany’s right wing AfD party have said that they’d call a Brexit style referendum if they weren’t able to make material reforms to the EU, if they were to come to power. The party want to see the “democratic deficit” of the EU removed, whilst the European Commission needs their powers curbing as an “unelected executive”. The party is ahead of all the parties that make up the current government, according to polls, and is eyeing regional elections in September to make a big impact.

Germany is traditionally staunchly pro-Europe and though the AfD are growing in popularity, support for EU membership is overwhelmingly favourable, so we’re not too sure what the AfD would gain by such a move – aside from stoking more pronounced division. The FT has the story, click here to read.

DeSantis Drops Out and Endorses Trump

This weekend, Florida Governor Ron DeSantis dropped out of the presidential race, saving his campaign from the Republican primary election in New Hampshire later this week. Following the decision, DeSantis publicly endorsed Donald Trump, stating that “it’s clear to me that a majority of Republican primary voters want to give Donald Trump another chance”.

The move follows Trump’s success in Iowa last week, which saw the former President command 51% of the vote. This came as Haley took 21% against DeSantis’ 19% – a particularly poor result for Florida’s Governor given the amount of time and resources he had pooled into the state.

 

PBoC Interest Rate Decision

This morning has seen the PBoC maintain its 1-year loan prime rate, keeping it at a record low of 3.45%. This now marks the fifth consecutive month that the 1-year LPR has been kept at 3.45% and comes as the central bank tries to keep monetary conditions loose in an attempt to stimulate the economy.

This follows the PBoC keeping their medium-term policy rate unchanged at 4.2% for the seventh consecutive month as the central bank grapples with an economy facing severe headwinds, deflation, and a weakening renminbi.

Starting Off the Week

This week gets off to a slow start as far as data releases are concerned, as attention turns to the BoJ’s interest rate decision tomorrow. UK public sector net borrowing figures will also be released tomorrow morning, with markets looking to keep a close eye on whether the figures may give No.11 some ‘fiscal wiggle room’. This comes ahead of Eurozone consumer confidence figures which are expected to see a slight improvement from last month’s print of -15.

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