European markets in the red, weighed on by political uncertainty

Following the recent elections for the new European Parliament, the political scenario of the Union is complicated and unstable due to the general consensus for the social Right and sovereignist parties. He doesn’t like marketsno political instability and uncertainty, which adds to the poor visibility on interest rates and as a result European indices have generally been subject to significant sell-offs on the market, losing on average 4% compared to the performance ofof the S&P 500.

European markets in red

He writes it Luca VallarinoTrading Desk manager and manager and member of the IMPact Investment Committee, explaining that iThe resilient macroeconomic frameworkthe microeconomic context which emerged in excellent shape from the quarterly reporting season and the push given by the technological sector continue to lead to a downward trend in volatility, which has now fallen to its lowest level in four years.

In particular, “the context of France is relevant where the Ressemblement National, Marine Le Pen’s party, obtained over 30% of the votes, and in light of the election results President Emanuel Macron therefore decided to dissolve Parliament and to call early legislative elections scheduled for June 30th and July 7th.
The topic appears particularly delicate since the France is not in a sound financial situation public, with public debt in relation to national GDP equal to 111%, and expected to increase; in 2023, the public debt per capita income of the French has risen to 45,000 euros and is expected to arrive at 50,000 in two years”.

Political uncertainty weighs

In the last year – continues Vallarino – the government has closed the exercise with a deficit of 5.5% of GDP, triggering the opening of the infringement procedure by the European Union. Also considering the always very low spreads with respect to Germany, its emissions have been scarcely the object of investments by the domestic investors and today the 50.5% of its public debt resides in foreign hands and is therefore potentially more exposed to greater speculative instability.
The French public debt, in absolute value, it is the largest in Europe, equal, at the end of 2023, to 3101 billion euros, and at the end of May France had been the subject of a downgrade by the Fitch agency, which had brought the rating on transalpine sovereign bonds to AA-

France, what will happen?

Precisely in such a precarious public finance framework, the RN manifesto “does not see the securing of the state budget as a programmatic necessity: on the contrary, it proposes, for example, significant cuts in some taxes, prolongation and extension of subsidies for family energy consumption, maintenance of a retirement age among the lowest in the European Union. At the same time, the markets are equally frightened by a possible victory of the Left coalition, which presents a particularly radical program and certainly harmful to the public budget, already currently expected to deteriorate unavoidably given even just the necessary increase in defense spending”. However, the expert concludes, “the However, the outcome of the legislative elections appears far from being a given.”