Britain’s exit from the European Union has been plunged into uncertainty.
Theresa May has not secured the clear mandate that she sought for her version of a hard Brexit.
When she called the election, she declared: “Every vote for the Conservatives will make me stronger when I negotiate for Britain with the prime ministers, presidents and chancellors of the European Union.”
Well, she is not stronger.
She has fewer seats than she started with.
As a result, it will now be hard for the government – formed with the help of Northern Ireland’s DUP – to start talking to the EU in nine days time as planned without rethinking its strategy.
Theresa May has said she will form a government with the support of the Democratic Unionists that can provide “certainty” for the future.
Speaking after visiting Buckingham Palace, she said only her party could form a “legitimate” administration after winning the most seats and votes.
She said she would work with “friends and allies” in the DUP to take forward Brexit, saying “let’s get to work”.
The Tories are eight seats short of the 326 needed to command a majority.
FT/Roger Blitz, Michael Hunter & Michael Mackenzie/06-09-17
The pound fell more than 2 per cent and prompted a sharp divergence in UK equity prices after the general election result deprived Conservative prime minister Theresa May of a parliamentary majority, plunging the country into political uncertainty less than two weeks before Brexit negotiations start.
…The uncertainty created by the election result ahead of the country starting negotiations with the EU over leaving the trading bloc was primarily being expressed in currency weakness.
“We must consider that a political risk premium will hang over the pound for the foreseeable future,” said Stephen Gallo, a foreign exchange strategist at Bank of Montreal. This will “put a ceiling on the pound”.
FT/Katie Martin & Robin Wigglesworth/06-08-17
The exit polls are in. They suggest the Conservatives are on track to win 314 seats, with 266 to Labour and 14 to the Liberal Democrats. That means the Tories are shy of a majority, and we are heading for a hung parliament.
Sterling has taken a heavy blow, falling 1.4 per cent on the day to $1.2719 at just past 5pm in New York, which would be its biggest one-day drop since early October.
PG View: Gold is nonplussed, trading little changed from where it spent much of the day.
Brits headed out Thursday to vote in a general election that’s still managing to get some people keyed up, even though it’s the third time in just over two years they’ve been called to the ballot box.
“It could be very surprising, the result. So we’re living more on excitement today, than actual results,” said an elderly woman voting in central London who declined to give her name.
“We’re all feeling very odd in England at the moment, because we’re not sure what’s going to happen,” she said.
Washington Post/Damian Paletta & Robert Costa/05-22-17
President Trump on Tuesday will propose cutting federal spending by $3.6 trillion over 10 years, a historic budget contraction that would severely ratchet back spending across dozens of programs and could completely reshape government assistance to the poor.
…Mick Mulvaney, director of the Office of Management and Budget, said the spending plan, titled “A New Foundation for American Greatness,” is focused on protecting taxpayer money and cutting spending on programs that are ineffective or encourage people not to work.
…The proposed budget refocuses decades of U.S. spending — both foreign and domestic — to reflect Trump’s belief that too much taxpayer money is simply given away.
CNBC/Berkeley Lovelace Jr./05-23-17
President Donald Trump’s budget proposal is likely to help produce 1.9 percent economic growth, not 3 percent, former Office of Management and Budget Director Jim Nussle told CNBC on Tuesday.
Nussle’s comment came the morning after Trump’s proposed fiscal 2018 budget became public. The White House said it is a key component in pushing economic growth to 3 percent.
The Congressional Budget Office currently estimates, however, growth at about 1.9 percent and the Federal Reserve projects the economy will expand at a 1.8 percent annual rate.
Politico/Nancy Cook & Burgess Everett/05-18-17
Republicans’ long-held dreams of tweaking Medicaid, repealing Obamacare and overhauling the tax code appear in more jeopardy than ever as scandal and investigations beset President Donald Trump’s White House.
Some Republicans fear that subpoenas and congressional inquiries will swamp the time they need to pass a health care or tax bill in 2017 — not to mention renegotiate NAFTA, unify behind a $1 trillion infrastructure plan or build that border wall.
“Everything affects our work right now. The more controversy we have the more difficult it is to do things,” said Senate Finance Chairman Orrin Hatch (R-Utah). “But this place is filled with controversy, so if you don’t understand that, you’re in the wrong job.”
Politico/John Bresnahan & Rachael Bade/05-16-17
…Republicans are privately beginning to worry that they may one day have to sit in judgment of Trump, or that more damaging information from Comey could force the president to step down.
…More Republicans have openly discussed the possibility of a select committee or the appointment of a special prosecutor to look into the Trump-Russia connection. It’s still a minority of GOP lawmakers, but Republican leaders are watching closely.
…And if Republicans are paralyzed and can’t pass anything despite control of the White House and Congress, how can they justify their majorities when they go before voters next year?
PG View: Whether the accusations are true or not, they provide a monumental headwind to anything the President was hoping to accomplish.
FT/Jamie Chisholm & Michael Hunter/05-17-17
Investors were retreating to the sidelines on Wednesday and seeking havens on concerns that President Donald Trump’s ability to push through his pro-growth policies will be sidelined by deepening political controversy.
Reports that Mr Trump sought to interfere in an FBI investigation is the latest controversy to ensnare the White House, damping global risk appetite and causing some investors to seek the perceived safety of government bonds, gold and the Japanese yen.
PG View: In a separate article, the FT acknowledged that the deepening controversy “delivered a boost to the price of gold.”
Bloomberg/Gregory Viscusi, Helene Fouquet & Marc Champion/05-11-17
On June 11, French voters will return to the polls for legislative elections, followed by a runoff a week later for districts where no candidate wins outright—typically most of them. While the president’s party often gains a majority or a strong plurality in the National Assembly, this year things look different. For the first time, France’s two main parties were absent from the second round of the presidential election, and they’re seeking to use the legislative vote to bounce back. Macron, meanwhile, has never held elected office. He founded his party just over a year ago and has little on-the-ground infrastructure to field candidates or get voters to the polls. “Macron’s biggest challenge is to win the battle for Parliament,” says Dominique Reynié, a politics professor at Sciences Po university in Paris. “Without a majority, he’d have only limited power.”
PG View: A politically hamstrung President means the status quo will prevail in France. Status quo is the last thing the people of France want . . .
Bloomberg/Shannon Pettypiece, Steven T. Dennis & Laura Litvan/05-11-17
President Donald Trump’s firing of FBI Director James Comey is an unwelcome distraction for a White House already straining to enact its agenda and could hamper its efforts to pass a repeal of Obamacare and cut taxes.
Comey’s ouster on May 9 polarized Democrats and unnerved some Republicans, overshadowing almost all other business at both the Capitol and the White House. Trump’s aides and his congressional allies struggled on Wednesday to defend the decision, diverting precious time from other key issues.
With limited manpower and political capital, the White House and Congress can wage war on a finite number of fronts. Trump is already mired in a battle over health care and is preparing for a fight over government spending, pushing his plan to slash corporate and individual taxes further into the future. All of that gets harder with the need to confirm a new FBI director and fend off demands for an independent Russia investigation.
French voters chose a centrist reformer over the nationalist right on Sunday by electing Emmanuel Macron as their next President. The question now is whether Mr. Macron can deliver on his promise to reform France’s sclerotic economy and diminish the Islamist terror threat.
Mr. Macron’s decisive victory is as much a rejection of the far-right National Front as an endorsement of his platform.
…Mr. Macron’s ability to push reform will depend on the strength of the parliamentary coalition he can assemble. If En Marche! fails to win a majority in June’s parliamentary vote, he should hope the Republicans do. One way to set the tone for the June vote would be to invite Republican heavyweights to join the Macron cabinet.
…The French center held, barely. If Mr. Macron fails to deliver faster growth, France may not be so lucky the next time.
Reuters/Mathieu Rosemain & Matthias Blamont/05-08-17
Emmanuel Macron was elected French president on Sunday with a business-friendly vision of European integration, defeating Marine Le Pen, a far-right nationalist who threatened to take France out of the European Union.
The centrist’s emphatic victory, which also smashed the dominance of France’s mainstream parties, will bring huge relief to European allies who had feared another populist upheaval to follow Britain’s vote to quit the EU and Donald Trump’s election as U.S. president.
…it was a record performance for the National Front, a party whose anti-immigrant policies once made it a pariah, and underlined the scale of the divisions that Macron must now try to heal.
…His immediate challenge will be to secure a majority in next month’s parliamentary election for a political movement that is barely a year old, rebranded as La Republique En Marche (“Onward the Republic”), in order to implement his program.
Sunday’s presidential duel pits Mr Macron against Ms Le Pen and their clash of visions for the eurozone’s second-largest economy. Opinion polls suggest he will win but the fight for office has exposed a divided country: one part happy, the other unhappy; one urban, the other rural and suburban; one embracing internationalism, the other seeking to erect barriers. They are the same faultlines shaking other western democracies, splitting those who feel they have gained from the far-reaching postwar liberal shift towards an interconnected world, and those who fear they have lost, or will lose out.
…The debate over the impact of globalisation is likely to dominate the five-year term of France’s next president.
To “Frexit” or not to “Frexit”?
That’s been one of the biggest concerns for investors in recent months and on Sunday the question is likely to finally be put to rest when the French vote in the second and final round of their hotly contested presidential race.
…“If Macron wins, we will go back to business as usual,” said Philippe Waechter, chief economist at Natixis Asset Management.
“If it is Le Pen, she will target a Frexit. She wants France to exit from all European institutions. The European institutions are based on the French-German couple and if Le Pen wins, it will be only Germany and probably it will be the start of the decomposition of all European institutions,” he added.
CNN/Manu Raju & Ted Barrett/05-01-17
Bipartisan congressional negotiators reached a critical agreement late Sunday on a massive spending bill that if approved by the House and Senate would fund the government through the end of September, senior aides from both parties told CNN.
The plan would add billions for the Pentagon and border security but would not provide any money for President Donald Trump’s promised border wall with Mexico.
Votes in both chambers are expected by the end of the week.
BlackRock Inc. Chief Executive Laurence Fink cast doubt on the viability of the Trump administration’s tax plan, saying that if the proposal adds to the country’s deficit, it will create a “severe issue.”
Mr. Fink, who runs the world’s largest asset manager, also called the possibility of sustainable 3% growth unlikely. Part of the challenge the U.S. faces, Mr. Fink said, is demographics. Baby boomers, the largest living generation in the country is aging, reaching retirement age.
“With our demographics it seems pretty improbable to see sustainable 3% growth,” Mr. Fink said at an investing conference hosted by research firm Morningstar Inc. in Chicago.
AP, via CNBC/04-28-17
With just hours to spare, Congress easily approved a short-term spending bill Friday that would prevent a partial federal shutdown over the weekend. But on President Donald Trump’s 99th day in office, lawmakers were leaving until next week without completing two other measures he’s coveted: A Republican health care overhaul and a budget financing government for the entire year.
WSJ/Richard Rubin & Nick Timiraos
President Donald Trump called for deep reductions in business tax rates and major changes to the individual tax system in a bid to reinvigorate his economic and legislative agenda as he nears the 100-day mark of his presidency.
…Mr. Trump is also proposing a 35% top tax rate for individuals, down from today’s 39.6% rate but above the 33% rate he backed during the campaign. Lower brackets would be set at 10% and 25%, and the standard deduction for individuals would be doubled.
The corporate tax rate would drop to 15% from 35%, and U.S. companies would owe little or no tax on their future foreign profits. The tax rate on business income reported on individual returns would also drop to 15% instead of being taxed at individual tax rates.
Expect investors to zero in on what the White House has to say about corporate taxes — widely expected to be cut to 15%, as will the top income-tax rate. There’s wariness about just how much POTUS can achieve, given the pushback over health care, and there are worries about a potential government shutdown wreaking havoc in the near term.
…There’s no doubt in Michael O’Rourke’s mind which way the dice will fall. The JonesTrading strategist is convinced the tax announcement will be an “unrealistic, massive disappointment.”
“It will be hard (likely impossible) for the president to get his own party to approve massive unfinanced corporate tax cuts, let alone the Democrats,” he tells clients. “Many politicians in Washington want to see the president fail. The more he promises and raises expectations, the more likely it is that he will.”
Less than a week before the federal government is scheduled to shut down absent a funding bill, the White House’s battle lines remain fuzzy.
…Hours after Trump touted the importance of building a wall, a White House official signaled later Monday that the President won’t insist on that funding in a spending bill to keep the government running past Friday. The official said that even some funding for “border security” could satisfy the President at this point, with the expectation that wall funding would come in future spending bill negotiations.
AP, via BusinessInsider/04-24/17
French presidential candidate Marine Le Pen has announced that she is temporarily stepping down as head of her National Front party.
Monday’s move appears to be a way for Le Pen to embrace a wide range of potential voters ahead of the May 7 runoff between herself and Emmanuel Macron, the independent centrist who came in first in Sunday’s first round.
“Tonight, I am no longer the president of the National Front. I am the presidential candidate,” she said on French public television news.
Politico/Rachael Bade, Burgess Everett & Kyle Cheney/04-23-17
President Donald Trump and Congress are on a collision course over government funding this week, as the White House demands money for a border wall with Mexico and Democrats vow it will never see a penny.
But just five days out from a government shutdown, Trump appears headed for disappointment. Democrats are signaling they’re unlikely to cave, and Hill Republicans are already pressing the administration to fight another day.
Centrist Emmanuel Macron has gone through to the second round of the French election, where he will face far-right leader Marine Le Pen.
Mr Macron, a former banker, is seen as a political newcomer – and ran without the backing of an established party.
After topping Sunday’s vote, he is now favourite to win the run-off on 7 May.
It is the first time in six decades that neither of France’s main left-wing or right-wing parties has had a candidate in the second round.
FT/Michael Stothard, Anne-Sylvaine Chassany & Harriet Agnew/04-21-17
The murder of a policeman in the centre of Paris has dominated the final day of France’s volatile presidential election campaign, fuelling security fears and sparking concern that undecided voters would be influenced by the terror attack.
…Bernard Cazeneuve, the prime minister, called on the French people not to let the attacks shift their vote, saying they should “not succumb to fear, manipulation, division”. He added that “nothing must hamper this democratic moment, essential for our country”.
MarketWatch/Mike Bird & Christopher Whittall/04-19-17
With the start of the French election just days away, investors are contemplating their nightmare scenario: a choice between far-left and far-right candidates.
In recent days, a surge in opinion polls has placed Jean-Luc Mélenchon, a left-wing firebrand who promises higher wages and fewer working hours, as a potential candidate to move past this Sunday’s first round of voting. That could set up a second-round vote in May 7 with Marine Le Pen, an economic nationalist who wants to pull France out of the euro.
…A runoff between Ms. Le Pen and Mr. Mélenchon “would be a disaster for France…[and] a disaster for Europe,” said Patrick Zweifel, chief economist at Pictet Asset Management.
Under that scenario, investors would dump the debt of France and of weaker European economies and send the euro sharply lower, analysts say.
PG View: Apparently some people are thinking about this possibility . . .
CNN/MJ Lee, Deirdre Walsh & Lauren Fox/04-20-17
Top House Republicans may be nearing a significant breakthrough among some key players on efforts to repeal and replace Obamacare, one month after a Republican health care bill was pulled from the House floor.
The leader of the conservative House Freedom Caucus, North Carolina Rep. Mark Meadows, and the head of the moderate Tuesday Group, New Jersey Rep. Tom MacArthur, are working toward a deal that could bring 18 to 20 new “Yes” votes from the conference’s conservative wing, according to a source familiar with the talks. But it’s not clear there would be enough votes in the broader GOP House conference to pass the bill.
PG View: Stocks seem to like this news as it fosters some hope that the broader Trump agenda has not stalled completely.
Reuters/Sudip Kar-Gupta & Sarah White/04-14-17
France’s presidential race looked tighter than it has all year on Friday, nine days before voting starts, as one poll put all four main candidates within touching distance of the two-person run-off round.
The Ipsos-Sopra Sterna poll for daily Le Monde showed centrist Emmanuel Macron and far-right leader Marine Le Pen tied on 22 percent each in the April 23 first round, with the far-left’s Jean-Luc Melenchon and conservative Francois Fillon on 20 and 19 percent respectively.
That 3 percentage point gap among the top four was within the poll’s margin of error, suggesting the election is wide open.