Will the Gap in the markets close
The recent elections in France caused the markets to leap sharply and leave behind open price gaps, Will this gap be closed in French presidential election second round vote on 7.5.207
The results of the first round of the French presidential elections met expectations.
Emanuel Makron, the center’s candidate, came in first with 24 percent of the vote, and right-wing candidate Marin Le Pen came in slightly behind, with 21.3 percent of the vote. Assuming he will not be involved in political embarrassments such as those that hurt the chances of right-wing candidate Francois Fillon, Macaron is expected to beat Le Pen in the second round on Sunday
Even with a deteriorating economic situation, there is a limit to support that can be achieved by populist parties, and at the moment it seems that it will not be enough to win power in France or Italy. But the fact that these parties and their candidates are on the rise, especially among the young, attests to a deep political polarization posed by governmental challenges that may delay needed reforms.
In France, Italy and Spain growth is too slow, unemployment is high and unemployment among young people is even higher. In France, the unemployment rate among young people is 24% and its rate of decline is far from satisfactory. The rate of unemployment among young people in Italy stands at 35% and in Spain, it is over 40%. The three countries have well-developed welfare mechanisms, but these are better for veteran and unionized workers, much more so than with new participants in the labor market. The reforms that have already been implemented to help young people are insufficient in light of the weak overall growth.
The euro weakened against most of the major currencies, and especially against the dollar since mid-2014. This trend caused a surplus in the balance of payments of the euro zone, helping to revive the competitiveness of export sectors in France, Spain, and Italy. In each of the three countries, the tourism sector is an important source of employment and income, and its investment increases if measured in euros. Of course, the weakening of the common currency greatly increased the balance of payments in Germany and other countries in northern Europe, where the cost per unit of labor is low relative to the level of productivity. Europe needs a balance in costs per unit of work, but in the current atmosphere of low inflation, this process will take time. Meanwhile, the weak euro could help growth
Without deeper reforms, the simple demographic calculus shows that the part of the population that feels deprived and opposes the establishment is only expected to grow. The question is whether this trend will lead to a total disruption of the existing situation or a political polarization that will weaken the efficiency of the governments
Last time the markets reacted optimistically and jumped, whether the gap will be closed next week
I chose 4 indicators for the market: the Dax Index, the cac40 Index, the Dow Jones Index, and of course the Eurodollar – you can see in the charts the open gaps
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Markets gap
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You can see the gap that opens and does not close, the gaps are 100 points average
Gaps tend to quarantine – it’s all a matter of time
Will we get back here or its will continue without?
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