After months of negotiations that ultimately toppled two prime ministers, France has finally secured parliamentary approval for a national budget. The breakthrough was made possible when the Socialist Party signalled it would stand aside, provided certain concessions were made. Chief among them was a commitment from President Macron not to revisit plans to lift the retirement age from 62 to 64. Prime Minister Lecornu framed the budget as firmly focused on curbing government expenditure while steering clear of new taxes on households and companies. Financial markets welcomed the outcome, treating it as a sign that political uncertainty in France has begun to subside. That shift in sentiment was visible in bond markets, where the yield gap between French and German debt narrowed back to levels last seen when Macron called the snap election in June 2024.
Elsewhere, President Trump announced on Monday that the United States had struck a trade agreement with India, one that includes them ending their purchases of Russian oil. The move aligns with Trump’s broader effort to suppress revenue streams supporting Russia’s war in Ukraine. Russia has already felt the impact of declining Indian demand, exacerbated by measures such as sanctions on tankers breaching the G7 price cap and stricter insurance rules limiting coverage for Russian oil shipments. According to reports, the Trump administration has told Prime Minister Modi that India will soon be able to replace Russian supply with crude sourced from the U.S. and Venezuela. Trump also said Washington would lower its primary tariff on Indian goods from 25% to 18%, while scrapping an additional 25% penalty linked to India’s previous oil purchases from Russia. Asian equity markets reacted positively to the news, opening higher on Tuesday.
In the UK, investors largely expect the Bank of England to keep interest rates unchanged at 3.75% when it meets on Thursday, with one or two rate cuts pencilled in for later in the year. A run of upbeat economic data (including stronger-than-anticipated GDP growth in November alongside improving business activity in January) has helped lift sterling against both the dollar and the euro so far this year.
Attention is also turning to the latest round of major technology earnings. Results begin with Alphabet later today, followed by Amazon’s update on Thursday. We also have the Eurozone’s inflation rate and ECB’s interest rate decision and U.S. jobs data.
Nicola Tune, Portfolio Specialist
