FRANCE: Gov't In Fragile Position w/PM Bayrou Under Pressure
Prime Minister Francois Bayrou is under significant political pressure amid an ongoing scandal over his knowledge, or lack thereof, of decades-long child abuse at a school in his home district attended by some of his children. Bayrou, who came to office in December 2024 following the removal of Michel Barnier by a parliamentary censure motion. FT: "Some have accused the prime minister of knowing about the problems since he was a prominent local politician at the time and later education minister. Bayrou has denied knowledge of the abuses." Bayrou is due to appear before a parliamentary inquiry into the abuses on 14 May.
- Politicians from the far-right Rassemblement National (National Rally, RN) and the far-left La France Insoumise (France Unbowed, LFI) have threatened Bayrou with a no-confidence vote in the National Assembly over the issue. Given that the Bayrou gov't does not hold a majority such a vote would be a major risk to the administration.
- Bayrou is already struggling with record-low approval ratings under the presidency of Emmanuel Macron. Pollster BVA reports that in April "Only 24% of French people have a good opinion of [Bayrou], a score that has been steadily declining since December 2024 (-7 points vs March and -16 points since his appointment) and which has reached its lowest level. This is also the worst score ever recorded by a Prime Minister since the election of Emmanuel Macron in our barometer..."
Chart 1. Francois Bayrou Approval and Disapproval Ratings, %
Source: BVA. N.b. Green line = good opinion, Red line = bad opinion.
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EQUITY TECHS: E-MINI S&P: (M5) Retracement Mode Remains Intact
- RES 4: 5970.87 61.8% retracement of the Feb 19 - Mar 13 bear leg
- RES 3: 5924.59 50-day EMA
- RES 2: 5864.25 Low Jan 13 and a recent breakout level
- RES 1: 5837.25 High Mar 25
- PRICE: 5818.75 @ 13:50 GMT Mar 26
- SUP 1: 5650.75/5559.75 Low Mar 18 / 13 and the bear trigger
- SUP 2: 5483.50 2.00 proj of the Dec 6 ‘24 - Jan 13 - Feb 19 swing
- SUP 3: 5396.00 2.236 proj of the Dec 6 ‘24 - Jan 13 - Feb 19 swing
- SUP 4: 5341.87 2.382 proj of the Dec 6 ‘24 - Jan 13 - Feb 19 swing
S&P E-Minis are trading at their recent highs. The trend condition is bearish and the latest recovery appears corrective. MA studies remain in a bear-mode set-up, highlighting a dominant downtrend. However, this week’s gains have resulted in a breach of the 20-day EMA. This signals scope for a continuation higher near-term - towards 5864.25, the Jan 13 low. A reversal lower would refocus attention on 5559.75, the Mar 13 low and bear trigger.
GILTS: /SWAPS: Swap Spreads Wider, Gilt Curve Flatter
Long end swap spreads are now wider on the day, seemingly benefitting from both the lower-than-expected gilt remit and smaller allocations to both the medium- and long-term buckets.
- While the initial take was that the increase in the unallocated bucket would probably filter largely into medium- and long-dated issuance, the introduction of programmatic gilt tenders means some may also end up in shorts.
- This has provided further gilt curve flattening and long end swap spread widening impetus.
- 5s30s cash curve ~6bp off highs, ~2bp flatter on the day
US-CHINA: USTR Greer Holds 'Candid' Introductory Call With Vice Premier He
The office of the United States Trade Representative has issued a statement confirming that USTR Jamieson Greer has held an 'introductory' call with Vice Premier He Lifeng to "exchange views on the U.S.-China economic and trade relationship." The two "agreed on the importance of maintaining communication going forward," according to the readout.
- The USTR readout notes: "During their candid discussion, Ambassador Greer outlined how President Trump is establishing a robust and reinvigorated trade policy that promotes domestic investment and productivity, enhances America’s industrial and technological advantages, defends our economic and national security, and benefits American workers and businesses. He also expressed serious concerns about China’s unfair and anticompetitive trade policies and practices."
- Xinhua notes, per Reuters, that "both sides had 'candid and in-depth' exchange of views on key issues on economy and trade," with He expressing, "solemn concerns on US tariffs and planned 'reciprocal' tariffs".
- The call comes after Senator Steve Daines (R-MT), a key ally of President Donald Trump who acted as an intermediary between Washington and Beijing during Trump's first term, travelled to China last week for meetings with senior government officials. The trip was seen as the first major step towards kickstarting US-China trade negotiations.
- Daines said: “It’ll be difficult to have any conversation about tariffs and non-tariff barriers until the fentanyl precursor issue is resolved,” adding he, "made it clear that President Trump needs to see China take decisive actions to stop the flow of fentanyl precursors."
