Victory for Macron
Emmanuel Macron has won a decisive victory over Marine Le Pen after the incumbent president took 58.55% of the vote against his rival’s 41.45% with a turnout of 71.9%. While this was much closer than the 2017 election where Macron took 66.1% to Le Pen’s 33.9%, his success means that he is the first sitting president to be re-elected for a second term in 20 years. Turnout remained low with an abstention rate of 28.0% – the highest level in any second-round presidential election since 1969 – meaning that well over 1 in 4 of the electorate who were registered to vote did not cast a ballot.Macron has promised to reunite the country as he conceded that many of those who voted for him did so to block Le Pen. Hence, as he enters his second five-year term Macron will have to address issues such as rising inflation, the crisis in Ukraine and climate change – in addition to concerns over immigration which was a salient issue for many who voted for Le Pen.  Given Le Pen’s stance on Nato (where she wanted to remove France from the organisation’s integrated command structure), its fair to say that many within the organisation will be taking a sigh of relief given that France is one of its largest contributors, financially and militarily. Macron’s victory over Le Pen will also likely mean an increase in support for Ukraine’s defensive campaign, investment into talking climate change and a close relationship within the EU.

Macron appears to have performed strongly in metropolitan districts including Paris and while overseas voters were far more likely to vote for Macron, interestingly Le Pen appears to have commanded a majority in French overseas territories such as Martinique, Guadeloupe and Reunion.

The Financial Times has more:

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Oil Falls as China’s Covid Cases Climb
Crude has fallen below $100dpb in this morning’s trading as investors consider the implications of a longer than expected lockdown in China. In fact, given the CCPs Covid measures and health of the Chinese economy more generally, the demand for petrol, diesel and aviation fuel is expected to reduce by 20% (year-on-year) in April in the world’s second largest economy. This is the equivalent to roughly 1.2 million barrels a day – which to give some perspective is around half the amount that most analysists are expecting will be cut off from the global supply given the sanctions on Russia. Shanghai’s lockdown is now well into its fourth week as the region’s 25m people have struggled with food and medical supply shortages. Elsewhere, Beijing is raising serious alarm bells as Covid cases rise and authorities race to track the spread. As such, the city is launching a mass testing of some 3.5m residents and many are contemplating whether a lockdown for the country’s capital will be on the cards.

The prospect of tighter monetary policy over in the States has also fed into the fall in oil prices as investors consider a subsequent slowdown in economic activity. This follows, Chairman Powell’s comments last week which sent shockwaves through the market as he signalled a further tightening of the Feds monetary policy when they next meet on 5th May. With headline inflation currently standing at 8.5% and expected to rise, speaking at an IMF meeting, Powell stated that “I would say 50 basis points will be on the table for the May meeting”. Hence, assisted by yesterday’s comments, the market has now pretty well priced in a rise of 50bpts for the next FOMC meeting, with many speculating that a further two 0.5% hikes may come in before the end of summer. The general market consensus now also suggests that the base interest rate could be 2.75% by the end of the year.

Nevertheless, investors are still speculating on the prospect of further sanctions on Russia, which could see a further run on oil given the deteriorating situation in Ukraine.

Bloomberg has more:

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Small Companies Taking a Big Hit
In the UK, the Federation of Small Businesses have stated that half of small companies say that rising costs will stifle growth. This comes after the federation – which represents around 5.5m small companies claimed that costs had increased for 90% of companies.

This follows a consumer confidence survey from GfK released just before the weekend which indicated that it is at its lowest level since 2008, highlighting the impact of rising inflation, falling real wages and a poor outlook on the future health of the British economy. The index dropped to -33, which came in well below market expectations and represents the second lowest reading since records began almost half a century ago. What’s more, is that the index fell to -55 when the survey focused on consumer’s economic expectations of the year ahead, putting it lower than the 2008 crash. The Major Purchase Index also fell eight points to -32 pts, further suggesting that consumers are holding off major purchases given their assessment on the future economic climate and personal finances.

These low levels of consumer confidence appear to have manifested themselves in poor retail sales released on Friday which indicate that m-o-m figures fell 1.4% in March, putting it well below market expectations of -0.3%. While retail remains 2.2% above pre-pandemic levels, the data shows that ‘non-store retailing’ – which includes online shopping – fell 7.9%, suggesting that as the cost of living continues to climb, consumers may be paying less attention to discretionary spending.

The troubling data relating to consumer confidence and retail sales follows the IMF reducing the UK’s growth forecast from 4.7% to 3.7% over 2022. Citing the rising cost of living, Brexit and persisting supply chain issues they also indicated that the UK will lag severely behind in 2023 and have the second slowest growth amongst the G20 (behind Russia).

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Looking Ahead
In terms of primary economic data, this week the markets will chiefly be looking at GDP figures out of the States on Thursday afternoon where the print for Q1 is expected to come in at 1% for the quarter. Then on Friday, Q1 Eurozone GDP figures are released where the market is expecting a 0.3% print for the quarter.​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​

Have a great day.

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