CAC Subdued, Markets Eye German Election

The CAC index has ticked higher in the Wednesday session. Currently, the index is at 5,244.70, up 0.13% on the day. On the release front, it’s a quiet day, with no eurozone or French indicators on the schedule. On Thursday, ECB President Mario Draghi will deliver remarks at the European Systemic Risk Board conference in Frankfurt.

Emmanuel Macron has enjoyed somewhat of a honeymoon period in his new job as president of the republic, but it’s crunch time for Macron and his government. Macron ran an election campaign which promised to overhaul the economy, and the government plans to take a big first step later this week, with a labor reform that will make it easier for employers to hire and dismiss workers. The labor reform comes into effect on September 22, but France’s largest unions have pledged to fight the move tooth-and-nail. A mass demonstration brought more than 200,000 to the streets, and another demonstration is scheduled for September 23. The government has promised further reforms to the country’s generous benefits system, specifically unemployment benefits and pensions. In the past, mass strikes and demonstrations by unions have managed to stave off major reforms. However, the government appears determined to move full speed ahead, and the markets will be watching closely to see who prevails in this round, the unions or the government.

Germany, the juggernaut of the eurozone, is holding a national election on Sunday, and Chancellor Angela Merkel is seeking a fourth term from an electorate of some 60 million voters. Merkel has seen some erosion in her popularity ratings, but is holding a comfortable lead over the opposition and is favored to win the election. Merkel is essentially the de facto leader of the European Union, so the extent of her success in the election could have a strong impact on European stock markets. Merkel’s center-right CDU party will likely have to enter into a coalition with another party, and historically this process can be quite lengthy. The current junior coalition party is the center-left Social Democratic Party (SDU), but the pro-business Free Democratic Party (FDU) also remains in the running. The FDU has insisted on the finance portfolio in any coalition agreement, and wants Germany to stop funding struggling EU members, such as Greece. The party has also taken a hard line on immigration, a hot election topic which could boost its performance in the election.

Economic Calendar

Wednesday (September 20)

• There are no eurozone or French events

Thursday (September 21)

• 9:30 ECB President Draghi Speaks

*All release times are EDT

*Key events are in bold

CAC, Wednesday, September 20 at 8:20 EDT

Open: 5229.80 High: 5229.80 Low: 5248.080 Close: 5244.70

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