The resignation of the French prime minister – the third in a year – is worrying businesses and investors across the eurozone
Latest insights:
The prolonged turmoil afflicting French politics ratcheted up early on Monday morning with the resignation of prime minister Sebastien Lecornu only weeks after he was given the job. Lecornu was France’s third prime minister in a year and had been tasked with achieving something that his two predecessors could not, which was to pass a deficit-cutting budget acceptable to a bitterly divided parliament.
Those efforts will now be put on hold – again – impacting business confidence and investment in France and across the eurozone. The immediate reaction from money market investors was flight from the euro, which slid to a two-week low against the dollar in early trading. The strengthening dollar also made gains against the pound.
US government shutdown spooks markets
In the US, the big story is the prolonged government shutdown, now entering its second week. The closure has suspended key federal programmes, and White House officials say the US could lose $15 billion in GDP each week while the impasse continues. The shutdown is adding to uncertainty about the direction of the US economy, and – investors believe – increasing the chances of further interest rate cuts this year.
In the UK, the Bank of England is not expected to cut rates further this year due to stubbornly high inflation.
Coming up:
The US government shutdown means that key economic data expected this week – including figures on jobless claims and the trade balance – will be delayed. Focus will be on the preliminary Michigan Consumer Sentiment survey (Friday), which is expected to show consumer confidence falling fast.
In Europe, German balance of trade (Thursday) and eurozone retail sales (Monday) will provide valuable insight into the underlying state of the economy.
