French Election: Is populism already passé?.
Relief rally follows 1st round vote which puts Le Pen against a moderate
If last year was the year investors were caught out by misleading polls, today’s market action suggests that investors are being caught out by mistrusting them. A collapse in near-term euro volatility, sharply higher equity markets and a compression in the spread between French and German government bonds emphasises the relief that Le Pen was not in a run-off with a far left-wing candidate.
Read more...You can’t be given a bloody nose twice.
The vote ‘no’ to Italian constitutional reform in this Sunday’s referendum has cost the Italian prime minister Renzi his job and perhaps thrown the Italian government into turmoil. Markets are however not in turmoil. The euro is close to unchanged, having fallen modestly after the referendum result. European equity markets are sharply higher this morning. While Italian 10y government bond yields have breached 2%, this increase in yields is notably less sharp than at the time of Trump’s election. Investors who panic sold after Trump and Brexit have been reconditioned (correctly in our view) to not immediately re-price risk on the back of specific political events.
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