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Week 27 Wrap: “Election year” is here as UK Labour win contrasts France; Trump wins immunity & annual report season hushes ASX

ASX News
05 July 2024 16:51 (AEDT)
Statue outside US Supreme Court, Washington DC

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The S&P 500 and the NASDAQ hit record highs again this week, but the ASX was still bruised by last week’s 4% inflation read on a WoW basis. US markets were shut on Thursday night Australia time, leading to a quiet bourse on Friday.

Making quiet conditions worse is that we’re in the ‘financial Christmas’ period – companies are all working on their annual reports and so there’s not a whole lot of newsflow hitting the bourse lately. Sure, there’s some, but nowhere near the volumes we were seeing even this time last year. This is actually something I’ve been noticing daily for a few months now.

While the day-to-day gross newsflow volumes of ASX announcements can’t really be used as a hard scientific economic indicator, one does get the impression that the animal spirits of publicly listed companies – broadly and with many exceptions – are opting to take a step back and wait to see where the economy (and trader enthusiasm) travels in H1 FY25. That’s already the case, despite the fact everybody is currently bunkered down, working on their annual reports.

Perhaps more exciting is that “the year of elections” – 2024 opened with much commentary focused on the geopolitical implications of a calendar year where dozens of national elections happened to line up – is now really starting to be felt.

First we had India’s a few weeks ago, where Modi stayed in relatively firm control despite a weaker supportbase than expected. Indian traders initially responded with some degree of uncertainty, but as of early July the Nifty 50 is up 7.23% MoM.

Then there was France, where the far-right National Rally party won around a neat third of the national vote, bringing that party – not exactly pro-EU – to likely hold considerable influence in government. A second round of elections in France take place this weekend, where candidates will be decided for good.

Despite initial concerns, the French CAC 40 is up 2.00% over the last week. Then there’s the UK.

Just this afternoon Australian time, UK Labour leader Keir Starmer – a former chief prosecutor – has won the UK election with a ‘landslide’ vote as the UK punishes the Tories for a wide array of different points of contention. Rishi Sunak’s appearance in the pouring rain without an umbrella only weeks ago, while perhaps just a bit of poor timing and not really indicative of performance, has repeatedly been pointed to by commentators this afternoon as the point where a unifying sense of farce might have kicked in.

Even Murdoch-owned newspapers deferred to a Labour vote. Right ahead of Europe trades at 4pm Sydney time on Friday, FTSE 100 futures were up around +0.25%.

And while Europe manages to pull the Western world’s attention, there is of course the one big looming election that happens in November – another US Trump vs Biden rematch.

While the entire world appears to have an opinion on last Thursday’s debate that saw Biden fumble alongside a very alert Trump, there was one other big development from the Supreme Court that has really changed things up. In short, the US Supreme Court – which Donald Trump stacked with conservative justices during his first tenure, don’t forget – has ruled that Donald Trump has a broad right to immunity when it comes to alleged criminal acts performed while President.

The debate really comes down to whether or not a criminal act conducted ‘officially’ can be criminal. The Supreme Court effectively handballed the decision to a lower court in regards to Trump’s ongoing case regarding January 6th, and it’s now unlikely to be heard until 2025 – after the November US 2024 election.

Even if that lower court departs from the Supreme Court’s sentiment, the Supreme Court is still the literal supreme court – it’s not clear how long a lower court’s decision would survive given an appeal would go back up the chain.

That may not seem like too much of a big deal, and wouldn’t be, were we in the 2010’s political era. But we aren’t – we’ve got Donald Trump, a man loved for his irreverence, but who has also said he would spend the first year back in power, if elected, persecuting the political opposition (read: arresting them.)

Should that happen, then long-held fears from the likes of Fitch Ratings and Moody’s that America’s perception of stability could suffer, ultimately risking American exceptionalism, may come true. If America does descend into a Trump-branded authoritarian state, it’s probably not too unlikely that Wall Street will do just fine.

But that’s not really what I’m getting at. The fact is, America’s stability and dominance economically – especially the USD and treasuries – has a lot to do with its perceived stability – and that perception could have changed very rapidly by this time next year.

At any rate: predict a lot more chatter about these elections and more in the coming weeks as analysts everywhere try to figure out what it all means for the future. That will probably remain the main topic until earnings season hits proper both in the US and here at home.

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