Politics drives financial markets - French elections and fundamental reviews
• European markets are set for a strong start to the second half of the year after the first round of voting in France gave the far-right National Rally party (RN) the lead, but its share was smaller than some polls had predicted, lifting the euro to a two-week high. Exit polls that coincided with opinion polls showed Marine Le Pen's National Rally party took the lead in the first round with about 34% of the vote, well ahead of left-wing and center rivals. However, the chances of the Eurosceptic and anti-immigrant RN party coming to power next week remain uncertain and will depend on political negotiations between its rivals in the coming days, with bargaining already underway.
The better-than-expected results lifted the euro, with the single currency hitting a two-week high of $1.076175, while equity futures rose 1% and French OAT bond futures rose 0.12%. The broader French market is likely to be supported, especially with the blue-chip CAC 40 index falling 6% after French President Emmanuel Macron dissolved parliament.
However, analysts say the week could still be volatile as the RN could win a majority in the second round of elections next Sunday. Traders and markets are concerned that the far right, as well as the left-wing alliance that came second on Sunday, have vowed to significantly increase spending at a time when France's high budget deficit has prompted the EU to recommend disciplinary action.
• Besides France, Britain is also preparing for a general election on Thursday, which the opposition Labor Party is expected to win in a landslide. While sterling rebounded in June, falling nearly 1% for the month, the currency's future depends on how the next government reassures fearful investors that its plans to fix the stagnant economy are credible.
• The British believe that Brexit was a mistake - WSJ.
• New era of clean energy: Transcontinental power lines. British homes to be powered by African energy under ambitious plan - WSJ.
• China issues rare earth regulations to further protect domestic supply - Reuters
China has unveiled a set of rare earth regulations aimed at protecting supplies in the name of national security, laying out rules for the mining, smelting and trading of critical materials used to make products from magnets in electric vehicles to consumer electronics.
• US and India extend truce on digital services tax until Sunday as deadline approaches - Reuters
India has introduced a digital services tax. The conclusion of a global agreement on the redistribution of tax rights to the largest and most profitable companies in the world is currently being discussed.
• China's economy is slowing
China Manufacturing PMI remained at a contraction level of 49.5, as expected.
China Non-Manufacturing PMI fell from 51.1 to 50.5.
• The company has already applied to the Korean Ministry of Employment and Labor to obtain permission to increase the upper working limit from 48 to 64 hours.
• Large banks raise dividends after passing stress tests - WSJ. On Friday, Goldman, Morgan Stanley and other banks detailed their plans to raise capital.
6% of salary becomes new standard for 401(k) savings - WSJ. Workers are saving a record share of their income for retirement. Automatic employer savings plans help with this.
• Nestle sees steady sales growth since the second quarter. Swiss food giant Nestle is targeting stable sales growth from the second quarter to the end of the year as inflation eases, the company's CEO told Swiss Weekend.
• Robusta coffee prices soared 40% - Bloomberg. Reason: drought in Vietnam (the largest exporter of robusta).
• A judge has ruled that the bulk of the SEC's lawsuit against Binance and its co-founder Changpeng "CZ" Zhao can proceed.
• Amazon is hiring the founders of AI startup Adept. Adept, a startup that develops artificial intelligence "agents" to perform various software tasks, has agreed to license its technology to Amazon, with the startup's co-founders and part of its team joining the e-commerce giant.
• The US Army has awarded Lockheed Martin a multi-year contract for the supply of Patriot anti-aircraft missile systems worth $4.5 billion - Reuters
The Patriot system is one of many advanced air defense systems supplied by the West to help Ukraine.
• The head of Goldman Sachs' hedge funds says it's time to reduce portfolio risk. After a wild rally led by top tech stocks that have pushed the S&P 500 to a series of all-time highs this year, now is "a good time to hit the brakes," says the head of a Goldman Sachs hedge fund.