NETHERLANDS: Wilders-Party Leaders Agree On Right-Wing Liberal Gov't Formation

May-15 14:49

Geert Wilders, leader of the largest party in the Dutch House of Representatives, has claimed that the leaders of the relevant parties have agreed to the formation of a right-wing-liberal gov't. This announcement follows months of negotiations involving Wilders' right-wing nationalist Party for Freedom (PVV), the centre-right People's Party for Freedom and Democracy (VVD), the centrist New Social Contract (NSC) and the agrarian populist Farmer-Citizen Movement (BBB). The party leaders will now need to gain agreement from their respective factions in order to move forward with the gov't formation process.

  • The new gov't - which will not involve Wilders or any other party leader in the prime minister's office or any other Cabinet position - will be one of many firsts. It will be the first time that the PVV has been part of a governing coalition. It previously supported outgoing PM Mark Rutte and his VVD in a confidence-and-supply agreement, but has never before held cabinet positions.
  • The NSC and BBB have also never been in gov't, and indeed having been formed in 2023 and 2019 respectively are formed by politicians with relatively little parliamentary experience, compared to those from the VVD.
  • Wilders is set to announce the identity of the incoming PM later in the day. NSC leader Pieter Omtzigt has confirmed that Wilders has put forward a name, but does not reveal their identity.

Historical bullets

CROSS ASSET: Risk Fades as Israeli DefMin Says "No Choice" But to Retaliate

Apr-15 14:43
  • Risk appetite knocked on Axios report citing sources in stating that "Israeli Minister of Defense Yoav Gallant told Defense Secretary Lloyd Austin Sunday that Israel has no choice but to respond to the unprecedented missile and drone attack launched by Iran over the weekend, a U.S. official and another source briefed on the call told Axios".
  • USD/JPY reverses off session highs on the back of that piece, with around 3,000 contracts trading on the move (shy of the US retail sales react move). Currency moves in tandem with the US 10y yield, which fades to 4.622%.

US: Iranian Attack On Israel Will "Probably" Help Ukraine Aid - Apps Ctte Cole

Apr-15 14:42

Rep Tom Cole (R-OK), the chair of the US House of Representatives Appropriations Committee, has told reporters that the Iranian missile attack on Israel has "probably" helped push House Republicans towards legislating a new supplemental package which includes aid for Israel and Ukraine.

  • Cole said on the supplemental: "Israel is front and center.. there are several options... What happened in Israel, there is strong, bipartisan determination to move quickly."
  • As House Speaker Mike Johnson did yesterday, Cole didn't rule out putting out three separate bills for Israel, Ukraine, and Taiwan: "Do you want three tough votes or do you want one," but said he doesn't know what the final decision will be.
  • Asked if the Iranian attack could help make the case for Ukraine, Cole said, "It probably did," adding: "There’s substantial support on our side."
  • Expanding on Ukraine, Cole said: "It’s not going to take long to do. There’s broad agreement on everything but Ukraine... we would have been doing the supplemental anyway... I want to do this as quickly as possible."
  • Speaker Johnson has three imperfect options. 1. He could put the the USD$95 billion Senate bill and risk being ousted by hardline conservatives. 2. He could attempt to pass a standalone Israel bill which could kill any chance of Ukraine aid in the future. 3. He could put forward a new compromise package which would be at risk of sinking under amendments from conservatives and progressive Democrats.

UK: Times-Party Conference Dates Could Indicate November Election

Apr-15 14:40

Steven Swinford at The Times posts speculation on potential date of UK general election: "Is Rishi Sunak going long on general election, as expected? Tories have just opened accreditation for party conference in Birmingham for Sept 29 -Oct 2. It could easily be scrapped if Tories decide to go early, but it tallies with suggestions he wants November election. Rough timetable: Early Sept: Autumn Statement. Sept 29: Tory conference. Nov 14: General election? Would also allow for two potential interest rate cuts ahead of voters going to polls..."

  • Political betting markets continue to show broad expectation that the election will take place in Q424, with an 82.6% implied probability according to data from Smarkets. Both Q224 and Q324 have around a 9% implied probability.
  • One notable event will be the upcoming English council elections on 2 May. In the (likely) event that PM Rishi Sunak's Conservatives record significant losses at the local level, there is the low-probability tail risk of an attempt by backbench Conservatives to oust Sunak in favour of another leader in a last-ditch effort to avoid defeat at the general election.
  • In terms of policy impact, a poor local election performance could see the gov't opt for an autumn statement containing more sizeable tax cuts or spending increases in an effort to maintain support. While the prospect of such a fiscal package being implemented is slim, given Labour's polling lead, any uncosted tax cuts could lead to market jitters.
Chart 1. Betting Market Implied Probability of Next General Election (by Quarter), %

Source: Smarkets