Diminishing political returns
By Michael McCarthy (chief market strategist, CMC Markets)
Investors are likely to shrug off political developments over the weekend in what looks like a modestly positive start
to the trading week. Shares and commodities steadied on Friday night and currency markets are calm in this morning’s
early trading. Futures’ markets point to small opening gains for Asia Pacific indices.
A swing to the far right in the Germany is unlikely to shift power away from PM Merkel’s ruling coalition despite the
warning it provides. Similarly a trend towards centre left parties appears insufficient to unseat the ruling party in
New Zealand, depending on the politically flexible NZ First party. Both the EUR and NZD are slightly softer in response
to the weekend elections. A statement from a North Korean official at the UN on Saturday that a pre-emptive strike on
the US was “inevitable” if it were to launch an attack on North Korea has sunk below the markets’ horizon.
After a brief hiatus macro data releases resume this week. Both US and British GDP data will speak to growth after
Friday night’s disappointing European PMIs. A Japanese manufacturing PMI read today precedes inflation and jobs numbers
on Friday. The RBNZ will make a post-election interest rate decision ahead of a European read on consumer confidence on
Thursday. Commodity traders will look for China manufacturing stistics due at the end of the week.
ENDS