Not Many Signs of Doves

President Emmanuel Macron has said that Europe should prepare to defend Ukraine by sending troops if Russia were to break through defensive lines. Mr Macron, speaking with the Economist, said “If Russia wins in Ukraine, there will be no security in Europe…who can pretend that Russia will stop there? What security will there be for other neighbouring countries, Moldova, Romania, Poland, Lithuania and others?”. His position is much more hawkish than other NATO members, with Germany ruling out putting any boots on the ground and the US even limiting the intelligence they’ve sent to Ukraine, in order to play an ‘arm’s length’ role on the battlefield.

The prime minister has his other battles on his hands at the moment and early signs from the local elections aren’t boding well. Every commentator is keen to stress that it’s still too early to tell if this trend will continue – as local councils ironically don’t have the budgets now to pay people to count votes through the night – but the early picture is that Labour has picked up a couple of key Conservative strongholds and other parties are making gains at their expense too.

Rishi Sunak will really be concerned about the mayoral elections in Birmingham and Tees Valley, where Andy Street and Ben Houchen are defending their seats. These should be won by the Conservatives – with Ben Houchen taking 72% of the vote when he won in 2021 and Andy Street being seen as very capable and happy to distance himself from his party – but if they aren’t successful here, or the overall election result shows losses of more than 500 then we’d imagine the no-confidence letter threshold is reached in pretty short order.

The US has been repositioning military hardware in the Middle East, which has got the attention of the markets. According to the Wall Street Journal the Pentagon has shifted fighter jets and armed drones out of bases in the UAE and into Qatar. The move is geographically inconsequential, but it’s being seen as material because the UAE told the US in February that it wouldn’t allow the US to use its base in the country to carry out airstrikes in Yemen and Iraq. Moving the hardware to Qatar gets around this problem and will be noted by various actors in the region.

 It’s been a public holiday in China and Japan today so the market is off to a slow start, but there are a couple of data points the market will be watching. The UK PMI reading for the services sector. It’s expected to show strong growth, with a reading of 54.9. The US non-farm payrolls is forecast to print at 250,000 jobs created – this number has been regularly beaten of late, but then revised down the month after. It’s hard to see much denting the strength of the dollar at the moment though!

Have a great weekend.