Street test for Macron

Peoples Digest Online-  President Emmanuel Macron faces the first challenge on the streets to his business-friendly reform agenda on Tuesday, when workers from the hard-left CGT union will march through French cities to protest against a loosening of labor regulations. Macron will nonetheless take comfort from the fact that France’s three main unions are divided over the issue; polls meanwhile show a broad public recognition that something must be done: while one survey indicated that nearly six in every 10 people oppose Macron’s labor decrees overall, they approve of most of the specific measures when asked to assess them individually. The German-Turkish diplomatic row is escalating, with Berlin now confirming that it has put all major arms exports to Turkey on hold after what it believes is the detention of another German couple in Turkey on political charges. So far, the arms deals have only been suspended rather than cancelled – something that would breach a NATO code under which alliance members are obliged to supply arms to each other if requested. Norway’s tax-cutting conservative prime minister Erna Solberg has declared victory in yesterday’s general election, seeing off a Labor-led challenge on the strength of her management of the oil-dependent economy. The win is inevitably heightening comparisons between her and long-reigning German Chancellor Angela Merkel, because no Conservative-led government has retained power in an election in Norway for over three decades. The snag is that the oil industry could still be affected by the vote, because Solberg will need support from two green-minded, centre-right allies to ensure a majority to pass legislation in parliament.

MARKETS

Batting away hurricanes and nuclear threats, world equity markets surged to new record highs on Monday and the rally has continued overnight in Asia and emerging markets. For the record, the new high on the MSCI World followed the fourth biggest one-day gain of the year, and the MSCI emerging markets sub-index hit its highest in three years early on Tuesday – within a whisker of the peak of 2014. The big macro picture is familiar – world economic growth running at a 3-4 percent clip, with inflation still missing in action and dimming the prospect of imminent U.S. or European interest rate tightening as a result. Citi’s G10 economic surprise index is slightly positive, showing consensus market expectations of economic activity on aggregate largely being met. Some of the immediate drivers on Tuesday then revert to big sectoral or individual corporate stories.

As Hurricane Irma weakened and changed course, global insurance stocks rallied more than 1 percent on relief that some of the worst-case scenarios had been averted. Apple’s shares also led the big U.S. indices higher as its new iPhone is expected to be unveiled as soon as Tuesday. Electric car maker Tesla’s shares jumped almost 6 percent after news that China was studying when to ban the production and sale of cars using traditional fuels. The ebbing storms helped uncloud the interest rate horizon stateside, meantime, with futures markets showing the chances of a year-end interest rate rise creeping back up to about 30 percent from less than 20 percent last week. U.S. Treasury yields, which had been depressed by North Korea and hurricane concerns, also jumped back from last week’s 10-month lows. Brent crude oil prices hovered just below $54. The dollar’s recovery continued against the yen, nudging above 109.50 early on Tuesday and helping the Nikkei outperform in Asia hours and gain another 1.2 percent.

Euro/dollar firmed up a little after Monday’s recoil, with a speech from European Central Bank Vice President Constancio in Frankfurt later on being eyed for more clues about the ECB’s next step and its relative concern about euro strength. Sterling was one of the biggest gainers on Monday, with its trade-weighted index rising back to early August levels ahead of this week’s Bank of England meeting and as British lawmakers voted in favour of the government’s proposed timetable for debating Brexit legislation.

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