marctomarket.com / by Marc Chandler / April 21, 2017
Neither the terrorist attack in Paris nor the strong eurozone flash PMI has managed to shake investors. Judging from the social media, many suspect that the terrorist attack plays into Le Pen’s hands, but investors do not seem particularly concerned. The French interest rate premium over Germany has narrowed, and gold is flat. UK retail sales fell sharply, yet sterling is holding on to the bulk of this week’s gains, which are the most here in 2017.
The US 10-year yield is holding on to the lion’s share of its gains as well. It had bottomed on Tuesday near 2.16% and rose to 2.25% yesterday and is at 2.24% now. Treasury Secretary Mnuchin’s claim that tax reform will be passed by the end of the year seems to be more a statement of intent than a reliable forecast. As President Trump’s 100th day in office approaches, the legislative agenda still seems to be tied up between the different wings of the Republican Party. Indeed, the attempt by the Republicans to forge a majority instead of reach across the aisle to some Democrats is proving more difficult and frustrating than many anticipated.
Although it is too late to have much impact on the French election, the flash PMI reading for April was impressive as it pulls further ahead of Germany, if such comparisons are valid. French manufacturing rose to 55.1 from 53.3, and the service reading rose to 57.7 from 57.3. This lead to the composite is rising to 57.4 from 56.8. All were above expectations.