October 5, 2022

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Macron is not enough, more and more uncertainty in the markets and more distance between the US and Europe from FinanciaLounge

© Reuters Macron is not enough, more and more uncertainty in markets and more distance between the US and Europe

A lower yen adds to war, inflation, interest rate hikes, and Chinese shutdowns, while exorbitant energy affects Europe, Elon Musk boosts American vitality, but the scenario is uncertain even on Wall Street

Macron’s landslide victory over Le Pen was not enough to reassure markets that were beginning to be blown by headwinds from Asia, as well as war fears from Russia, fears of high inflation and central bank rates, and geopolitical tectonic movements. . China’s prolonged shutdowns Reducing production activity and lower oil and gas prices, as well as the Hong Kong and Shanghai stock exchanges, while investors grapple with the new conundrum of the depreciation of the yen, which in a few weeks lost more than 10% against the stock exchange. The dollar, a colossal sum of the most traded cross in the world after the euro pair, ended at a twenty-year low. Despite making it zero, the yen, along with the Swiss franc, gold and Treasuries, are the safe-haven assets par excellence, precisely because of their stability. Some observers believe it is about quantitative tightening of the Federal Reserve, given that the Japanese and Chinese are big buyers of US debt, and others fear that it is a pre-warning of a new earthquake, perhaps between China, Taiwan, Korea and Japan, after the Russian-Ukrainian one.

The political factor of European Central Bank policy

However, tension and uncertainty still dominated the markets. For Macron, beating Le Pen by a much smaller margin than 5 years ago does not mean there is a clear path ahead.. In June he will have to deal with the election of the National Assembly, when it will not be easy to put a monolithic majority on his agenda. Meanwhile, in Europe, monetary policy has become an arena for political confrontation, inflation frightens the Germans and now The Bundesbank looks more like a party than a central bank, creating problems for both Chancellor Schulz’s government and Lagarde’s European Central Bank, increasingly torn between hawks and doves. Italy is particularly sensitive to the question of interest rates, where growth under threat from rising energy prices threatens to rebalance the debt-to-GDP ratio. Germany can accept and maintain lower growth or even technical stagnation in exchange for lower inflation, France not to mention the size of its debt, which is competing in absolute terms with Italy, Italy simply cannot allow …

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** This article was written by Finance