Political Right Surges in European Elections; Global Markets React to Inflation Data


Continuing with the election narrative, this week we will examine the recent European Parliamentary elections, which brought yet another surprise to the fore.

Key themes for this week include:
  • Europe sees a political shift to the right
  • United States (US) inflation surprises to the downside
  • US 10-year Treasury yields retreat to lowest levels since April
  • Oil prices take a breather
  • Euro hovers at seven-week low


Last week’s European Parliamentary elections marked a significant turn towards the political right, with far-right populist parties achieving notable success. These parties came out on top in France, Italy, and three other countries, securing nearly a quarter of the seats, just behind the centre-right bloc. This result underscores rising nationalist sentiment and raises concerns about the eurozone’s future, amidst ongoing geopolitical and economic challenges.


The recent elections revealed widespread discontent across Europe, reflected in the success of far-right populist parties. Known for their nationalist rhetoric and European Union (EU) skepticism, as well as opposition to green policies and immigration, these parties have tapped into various socio-economic issues. With Europe being impacted by the war in Ukraine, potential instability from a possible-second Trump presidency, stagnant living standards, strained welfare systems, and extreme weather events, the far-right’s surge poses a significant challenge to the traditional pro-EU consensus.

Marine Le Pen’s National Rally secured 32% of the vote in France, a sharp contrast to President Emmanuel Macron’s centrist allies, prompting Macron to call a snap election. In Germany, the Alternative für Deutschland (AfD) finished second, surpassing Chancellor Olaf Scholz’s Social Democrats (SPD). The AfD’s success, despite its controversial ties, highlights the changing political landscape in Europe’s key nations.


Despite their gains, far-right parties remain divided on key issues like economic policy and the EU. While these divisions might limit their collective influence in the European Parliament, their presence is already influencing political discourse. The centre-right European People’s Party (EPP), led by European Commission President Ursula von der Leyen, gained seats and remains the largest bloc. To maintain stability, the political centre now includes the EPP, Socialists and Democrats (S&D), Renew Europe, and the Greens.


The rise of far-right populism has significant implications for EU policy. The pro-EU majority in Parliament, though still intact, must address the concerns driving the populist surge without compromising the EU’s core principles. The centre-right and centre-left blocs will need to navigate a more polarised and fragmented political landscape.

A major point of contention will likely be the EU’s green agenda. The far-right’s opposition to green policies could lead to a scaled-back or redefined European Green Deal, potentially delaying or weakening climate change initiatives.


The rise of nationalist parties might lead to a more protectionist stance within the EU, hindering cross-border projects like the Capital Markets Union and new European investment vehicles. Increased focus on security and immigration could detract from economic integration and cooperation.

National politics in France and Germany will be crucial in shaping the EU’s future. Macron’s call for a snap election introduces unpredictability in France, especially with the possibility of Le Pen’s National Rally gaining more influence. The AfD’s rise in Germany and potential further gains in regional elections could increase policy instability.


The European Parliament elections have highlighted the pro-EU centre’s fragility amidst rising nationalist sentiment. Mainstream parties must address the issues driving voter discontent, such as economic stagnation, living standards, and immigration and security concerns.

The next five years will be critical for the EU. The pro-EU parties’ ability to maintain a cohesive and effective majority will determine the bloc’s capacity to address both internal and external challenges. The far-right’s influence, though fragmented, will remain, requiring a strategic and balanced approach to governance.


The US 10-year Treasury note yield fell below 4.27%, reaching its lowest level since 1 April. This decline follows data showing easing inflationary pressures, suggesting potential US rate cuts this year. The Producer Price Index (PPI) fell 0.2% month-over-month in May, against market expectations of a 0.1% increase, following a 0.5% rise in April. Additionally, the Consumer Price Index (CPI) showed an unexpected slowdown in annual inflation to 3.3% in May, below the consensus of 3.4%. The US Federal Reserve (Fed) kept interest rates unchanged and reduced its rate cut forecast for 2024 from three cuts to one, but acknowledged progress in curbing inflation.

The yield on the UK 10-year Gilt rose above 4.17%, recovering from a 15-basis point drop the previous day. This rise followed the Fed’s revised economic projections. The Bank of England is expected to maintain its current rates next week, with a potential cut anticipated in August or September. Recent data showed the United Kingdom (UK) economy stagnated in April, aligning with expectations, while industrial production and construction output fell more than anticipated. Despite high wage growth, the unemployment rate unexpectedly rose to 4.4%, its highest level since September 2021, with job vacancies declining.

South Africa’s 10-year government bond yield eased to around 10.50%, down from a one-month high of 10.98% on 5 June. The formation of a new government and anticipated outcomes largely influenced this movement. African National Congress (ANC) President, Cyril Ramaphosa, announced the decision to invite other political parties to form a government of national unity (GNU) after failing to secure a majority in the May 29 elections. All eyes now turn to the outcome of these negotiations, which is expected to be announced today.


In the US, S&P 500 and Nasdaq futures gained slightly after the PPI data indicated easing inflationary pressures. Semiconductor manufacturer, Broadcom, surged 13.5% after raising revenue forecasts for artificial intelligence (AI) chips and announcing a stock split. Its competitor, Nvidia, saw a 2.1% rise, and electric vehicle manufacturer, Tesla’s shares climbed 5% after shareholders approved Elon Musk’s $56 billion pay package and the announcement of a move to Texas. Conversely, space flight company, Virgin Galactic, dropped 7.8% due to a reverse stock split announcement.

In Germany, the DAX 40 traded 1% lower at 18,420 following a 1.4% increase in the previous session, reflecting concerns over prolonged higher interest rates. Industrial technology company, Siemens and aircraft manufacturer, Airbus, saw declines, while global software company, SAP, and telecoms company, Deutsche Telekom, rose. Online fashion retailer, Zalando, was the hardest hit, falling over 2%.

The UK’s FTSE 100 saw a slight decrease, retracting from a 0.8% gain in the previous session. Money transfer company, Wise, saw its shares drop over 19% following a forecast of slower income growth, while homes developer, Crest Nicholson, fell over 12% due to a profit warning. Life-saving technologies group, Halma’s stock rose over 8% after exceeding revenue and profit estimates, and telecoms firm, BT, saw its shares increase by 2% after Mexican telecoms group, Carlos Slim’s stake in the company was revealed.

South Africa’s JSE index rose 1.3% to close at 77,051, boosted by cooler-than-expected US inflation data. Retailer, SPAR Group, led the index with an 11.8% surge after announcing the sale of its loss-making Polish business.


Brent crude futures rose toward $83/barrel, driven by expectations of interest rate cuts despite rising US crude stockpiles. US producer prices fell unexpectedly, supporting the case for rate cuts that could boost economic growth and energy demand. However, Energy Information Agency data showed a 3.73-million-barrel increase in US crude inventories.

Gold dropped to around $2,310/ounce as investors assessed the Fed’s interest rate projections. Despite softer inflation data, the Fed’s hawkish stance contributed to the pressure on gold prices.


The US Dollar Index steadied in early trade on Friday, gaining back previous losses as markets weighed softer than expected inflation readings with a persistently hawkish Fed. The Fed has signalled the likelihood of only a single rate cut this year. The euro continued its descent, dipping as much as 0.5% during late trade on Thursday, and eliminated all its gains from the previous session, to trade at seven-week lows against the greenback, as political uncertainty continues to rattle investors. Meanwhile, the British pound remained above $1.28/£, capitalising on the dollar’s retreat.

The rand traded around R18.40/$, its strongest level since late May, as markets remain optimistic about government formation following the 29 May election. A softer dollar further assisted the rand.  

Overall, global markets continue to closely monitor central bank decisions, economic indicators, and geopolitical developments, which influence bond yields, stock performances, and commodity prices.

Key Indicators:

USD/ZAR: 18.45

EUR/ZAR: 19.80

GBP/ZAR: 23.51


GOLD: $2,311.88

Sources: Bloomberg, Refinitiv/Reuters and Trading Economics.

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