UK: ReformUK By-Election Win Will Concern Gov't, But Major PolicyShift Unlikely
The narrow win for the right-wing populist Reform UK in the Runcorn and Helsby by-election will garner significant headlines, but at least in the short-to-medium term is unlikely to notably alter gov't policy or stability. Nigel Farage's party won the seat by just six votes, overturning a 14k majority for the incumbent centre-left Labour party of PM Sir Keir Starmer.
- To date, right wing and eurosceptic parties have struggled to win elections outright with the UK's first-past-the-post electoral system allowing centrist and left-wing voters to vote tactically to shut them out. The exception being the European Parliament elections in 2019 in which Reform UK's predecessor, the Brexit Party, won a plurality of the vote.
- The Reform UK breakthrough, likely to continue through the day as results come in from local elections across England, will be as much, if not greater, concern for the main opposition centre-right Conservatives, which are poised for significant losses, as they are for Labour.
- With a substantial majority in parliament and the next general election not due until 2029, the Starmer gov't remains in a relatively solid position. Nevertheless, poor nationwide polling and the shock of losing a seat in the Labour heartlands of northwest England could see greater gov't focus on issues that have bolstered Reform UK support (immigration, cost of living).
- Speculation continues to swirl around the position of Chancellor of the Exchequer Rachel Reeves, who is seen as potentially in line for replacement amid sclerotic growth and public support for the gov't, especially on the economy, faltering.
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GERMAN AUCTION PREVIEW: 2.50% Feb-35 Bund
This morning, Germany will hold its sixth 10-year Bund auction of the year. On offer will be E4.5bln of the 2.50% Feb-35 Bund.
- The size is in line with the last re-open of the 2.50% Feb-35 Bund on March 12.
- Recent auctions in the German 10y segment have passed smoothly, with solid bid-to-covers (in a 1.83x to 4.87x range since July), bid-to-offers (1.52x to 3.98x range since July) and the low prices above the secondary market mid-prices throughout 2024/5.
- For the last 2.50% Feb-35 Bund auction on March 12, the bid-to-cover stood at 2.12x, while the bid-to-offer came in at 1.62x.
- The next German auction will be E2bln of a (yet unspecified) Green line on April 8, while the 2.50% Feb-35 Bund will be reopened next on April 23, for E4.0bln.
- Timing: Results will be available shortly after the bidding window closes at 10:30GMT / 11:30CET.
EQUITIES: Estoxx outright call seller
SX5E (20th June) 5300c, sold at 127.60 in 6.5k vs 2.86k at 5225.00.
COMMODITIES: Gold Trend Remains Bullish Following Sequence of Record Highs
WTI futures traded sharply higher Monday. This undermines the medium-term bearish condition and instead signals scope for a continuation higher near-term. The rally has exposed the next key resistance at $72.91, the Feb 11 high. Clearance of this level would strengthen the bullish theme. On the downside, initial firm support to watch lies at $69.01, the 20-day EMA. A breach of this level would signal a potential reversal. The trend condition in Gold is unchanged, it remains bullish. The latest rally reinforces current conditions and confirms a continuation of the primary uptrend. The rally also once again, highlights fresh all-time highs for the yellow metal. Sights are on the $3151.5, a Fibonacci projection. Support to watch lies at $3004.9, the 20-day EMA. A pullback would be considered corrective.
- WTI Crude down $0.2 or -0.28% at $71.09
- Natural Gas up $0.02 or +0.48% at $3.967
- Gold spot up $20.3 or +0.65% at $3133.08
- Copper up $3.7 or +0.73% at $505.7
- Silver up $0.31 or +0.93% at $34.0041
- Platinum down $6.15 or -0.62% at $985.32
