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Investors rotate into Europe ahead of French run-off

Wednesday, May 3, 2017


Optimism that the centrist candidate and frontrunner, Emmanuel Macron, will win the French presidential election run-off on May 7 is contributing to inflows into European stock markets at a time when sentiment towards US equities is cooling. The euro has risen against the dollar to its highest level since the US presidential election. Investors are focusing on euro-area activity -- first-quarter euro-area GDP outgrew the United States, while manufacturing and services purchasing managers' surveys are at a six-year high.


  • Bond markets remain sceptical about faster US growth and inflation -- the ten-year US Treasury yield has fallen since mid-March.
  • Oil prices have fallen by nearly 10% since April 11, owing to concerns about the credibility of OPEC's cuts and a persistent supply glut.
  • Sentiment towards China is starting to worsen because of credit-tightening measures and more regulatory scrutiny of financial instruments.
  • The only way Le Pen could become president would be if turnout among Macron's supporters was sharply lower than among her voters.

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