DAX Takes a Dive as Political Concerns Garner Speed

General elections in France are raising concerns as it seems ever more likely the right-wing party will land an outright majority.

The two-round vote will take place on June 30 and July 7 to elect a new national assembly. The latest polls show Le Pen’s National Rally (RN) party well in the lead, and possibly landing 307 seats out of the 577-seat parliament.

If the polls are right many of Macron’s candidates won’t even make it to the second round. This would leave the current presidential party with a small representation.

Polls suggest that the second largest party would be France Unbowed. Which is a coalition of far-left parties and has a similar stance to RN on illegal immigration and EU overreach.

An outright majority would allow Le Pen to elect the prime minister and put Macron at odds with the legislative branch. Still, Macron has said he will stay in power until the next presidential elections in 2027.

However, it would greatly undermine his authority, Macron has used article 49.3 of the constitution to pass laws as a directive at the stroke of a pen. The directive power is similar to the executive order used by U.S. presidents.

The DAX is down 0.81% on the day and almost 3.0% over the past 3 days. More importantly, the index is down 5.8% since the Monday open following the EU elections.

Whether the next elections usher in a new left- or right-wing movement, the market has it clear that they are unlikely to be as corporate friendly as Macron’s business driven party. The president’s drive to make France a corporate friendly country has helped the stock index returns.

However, citizens have different concerns about healthcare, public security and quality of life. Macron’s focus on profits has driven many of his voters away from the party. And it seems that his CEO approach to running France is about to face a hefty bill.

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Gino Bruno D'Alessio
Gino D’Alessio is a professional Forex trader with 20+ years of experience in the financial markets as a broker-dealer. Having worked in New York and London, Gino is regularly featured on Seeking Alpha. He completed the CAIA program in 2015, which also gave great insight into global macro factors. His main focus is FX majors, indices and commodities.
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