Unhappy voters swing the elections

The results from the UK general elections were rather uneventful, as an absolute majority for the Labour party is expected, vindicating Labour’s claim of “stability over chaos”. Meanwhile, the second round of French elections this Sunday (July   7) is making investors wary. The prospect of Marine Le Pen’s far-right party securing the greatest number of seats, without an absolute majority, indicate a political stalemate and unstable government. The market s however ascribe a greater probability to the scenario of a relative majority for the RN (National Rally) suggesting limited room for maneuver . As such, the ECB is in no rush to discuss emergency purchases of French bonds. Also, the ECB will take time to cut interest rates this year (we expect two more) as service inflation remains sticky for longer.