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Markets to ponder political economics

| Posted by: Paul Donovan | Tags: Paul Donovan

  • With the data calendar relatively quiet, political economics is likely to occupy the minds of investors. The Berlin local elections in Germany saw a decline in support for the government parties and a rise in support for the anti-EU AfD party.
  • The electoral mathematics do not make the rise of the AfD especially challenging at this stage. However, ever since the UK referendum result investors appear eager to extrapolate from populist shifts into wider and more concerning trends – and that is a risk with the German votes of late.
  • The EU Bratislava summit did not appear to achieve much (the Slovakian prime minister wants life in Britain to be "very painful"). The most interesting news was a leak from an EU president that UK PM May is aiming to trigger Article 50 that starts the exit process in February.
  • US inflation data on Friday again serves to remind markets that domestic inflation pressures have been hiding from the world, crouched behind a barrel of petroleum, for much of the recent past.