Daily Brief – France

Humphrey Percy
Chairman and Founder
Mon 28 Oct 2024


France

Crunch time for French ex EU/ Brexit negotiator PM Barnier as he struggles to get his budget approved on November 19, as he leads his minority Government with the backdrop of Moody’s changing their outlook for La Belle France from stable to negative last Thursday. Targeting a whopping €66 billion budget reduction through a mix of €44 billion of spending cuts and €22 billion of tax increases on companies it is a steep hill to climb. Failure will result in the fall of his Government, Barnier falling on his sword and another election. Just for good measure those bureaucrat titans the French Deputies have tabled 3,500 of amendments to the budget to pile further misery on master of the small print Barnier.

EUR/GBP 0.8329.



US Election

Ever stronger in the polls Donald Trump has this week espoused the concept of free and fair elections but the suspicion in the mind of his opponent Kamala Harris is that Trump only means that on the premise that the White House is his in 10 days time. 25 million votes have already been cast but on November 5 it is most unlikely that the result will be clearcut. In 2020 it took a further 2 days for all of the results to come in. It is expected that Trump will, irrespective of the exit polls being in his favour or otherwise, declare victory on November 5 and will then file lawsuits accusing the subsequent (Harris) votes of being illegal vote manipulation. Markets will be choppy and there is the possibility of civil disorder in major cities as the official outcome is reached but once it is reached which is likely to be finally on November 7, what passes as post election normality will return to both financial markets and to Main Street and the UK’s Labour Party activists can return home.

GBP/USD 1.2962



Euro

In the event that Trump does win, what does that mean for markets? At the most obvious level as mentioned above is increased volatility which given the already highly nervous atmosphere of the further increased level of tension in the Middle East will be felt even more strongly than it might have been. But if Trump does win and he imposes the trade tariffs that he has promised, EUR/USD could easily head towards parity once again.

EUR/USD 1.0796




US Bond Markets

As we have written previously neither Trump nor Harris have directly addressed the USD 9 trillion US Budget Deficit in their election manifestos. The assumption has been that it was in the too difficult tray on both of their desks and a vote loser to boot. But whether Trump unleashes a raft of business friendly measures that involve issuing still more Government debt or Harris continues with Bidenomics and social spending, the deficit will be bound to go through the 100% ratio to GDP level and that cannot be good for the USA nor the world and just for good measure it will be inflationary. Bond markets at this point are complacent but that is unlikely to last for long.

USD/JPY 152.31


Age of Aquarius

Full frontal nudity on stage and rocking music, Hair was a sensation when it opened in the East Village off Broadway, NYC this day in 1967. Billed as an American Tribal Love Rock Musical it packed in the punters and soon moved to Broadway in 1968 where it ran for 1750 performances closing in July 1972. This song is generally regarded as the best from the show:

When the moon is in the Seventh House
And Jupiter aligns with Mars
Then peace will guide the planets
And love will steer the stars

This is the dawning of the Age of Aquarius
The Age of Aquarius
Aquarius! Aquarius!

Harmony and understanding
Sympathy and trust abounding
No more falsehoods or derisions
Golden living dreams of visions
Mystic crystal revelation
And the mind’s true liberation
Aquarius! Aquarius!

When the moon is in the Seventh House
And Jupiter aligns with Mars
Then peace will guide the planets
And love will steer the stars

This is the dawning of the Age of Aquarius
The Age of Aquarius
Aquarius!

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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