Financial market research and analysis

Markets look through Paris shooting

The latest polls showing Emmanuel Macron keeping his lead has kept French election nerves at bay. The sense that Marine Le Pen’s success will end at the second round in May dissuaded investors from panicking about any impact the shooting of a policeman in Paris could have on the first round of voting on Sunday.

The Donald confidently tweeted that the shooting “Will have a big effect” but only modest moves in the euro and French stocks on Friday suggest markets think differently. It is worth noting that market optimism isn’t without some protection. The implied volatility for the euro is very lofty by usual standards.   Another strong showing from French banks BNP Paribas and Societe Generale offset losses in other sectors head of a strong of bank earnings next week.

No drama on the FTSE

UK stocks were stable on Friday after data showing a consumer spending slump in March dented the case for more Sterling strength. The FTSE 100 spent the last two days of the week oscillating around the 7000 mark. British investors are tossing up the outlook for corporate earnings against the rising possibility of a stronger Sterling.

Sky shares were little changed on the news the enquiry on its takeover by Twenty-First Century Fox would be pushed back by a month to June 20. Reckitt Benckiser shares dropped after reporting flat sales in the first quarter. On the FTSE 250, shares of Sports Direct dropped on the announcement of its expansion into the US.

Mixed open in the US

It was a mixed open in the US with the Dow up and the S&P slightly lower. Investors are preparing for a weekend of potential political upset and an onslaught of corporate results next week.

Tesla shares dropped on news the company was recalling 53,000 cars for faulty breaks. So far CEO and founder Elon Musk seems to have been successful at selling investors the dream of electric car market domination. But at some point technical failures such as those experienced with the autopilot feature or brakes, or missed delivery targets are going to weigh on the enthusiasm. 

Retail sales: Seven years bad luck

The British pound slipped after data released on Friday showed UK retail sales saw the biggest quarterly drop in seven years. The fall in sales happening at the same time as prices are rising is a combination not lost on market participants.

Sterling was able to bounce off lows of the day thanks to some hawkish comments from Bank of England rate-setter Saunders. Saunders said slack in the UK labour market is probably limited and that the BOE needn’t wait for Brexit uncertainty to change rates. The question is how much markets were baking in political instability versus economic difficulties when the pound was pummeled after Brexit.

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