The French Government in the past 3 years has been able to fund itself at between minus 0.75% and minus 0.25%- it now is at pretty much in the middle of that range. In other words, lenders to France are paying 0.50% for the privilege of lending the nation of La Belle France led by President Macron despite the rise of populism defined by Les Gilets Jaunes. Italy on the other hand over the past 3 years has funded itself at minus 0.25% and….plus 1.75% following the rise of populism defined by the Five Star Movement- it now stands at plus 0.50%. The question is: will populism in France feed through to the markets? And what does that mean for Europe and the European Project?
A fillip for FTSE up at 7151 last night on weaker GBP as realisation of likelihood of a resounding Government defeat for the Brexit deal dawned- subsequently confirmed by 149 votes. Gold steady at $1296. Oil at $56.93. While the result of the vote was not a surprise, it does mean that the likelihood of a NoDeal Brexit has materially increased given the inability of both the UK and the Eurozone to find common ground in the time that remains with the prospect of an extension dependant on their being real grounds to expect resolution in the next 3 months before the European Parliament returns following the May elections. Consequently, we are entering a period of uncertainty and greater and more frequent one day moves in GBP such as the one we saw yesterday.
Last week saw a monthly jump in the index of almost 6% the biggest rise since the 1980’s. So some rebound after a 2.9% fall in January plus shortages of housing plus a disproportionate number of sales in the South East of the UK which tend to be at higher prices are the reasons for this according to the economists. More likely it’s a combination of poor data and distortions due to the ongoing disastrous effects of Stamp Duty on the market-thank you George Osborne.
Discussion and Analysis by Humphrey Percy, Chairman and Founder