Barclays favors German blue-chip stocks over French ones, citing France's weak fiscal fundamentals and political instability. As borrowing costs rise, concerns grow over the French government's ability to pass a budget, with potential implications for market stability and investor confidence. The risk of bond vigilantes looms if political uncertainty persists, potentially widening the yield spread between German and French debt.
France's political turmoil has driven its borrowing costs to match those of Greece for the first time, with 10-year government bond yields nearly equal at 3.0010% and 3.030%, respectively. Prime Minister Michel Barnier faces a potential no-confidence vote from the left-wing New Popular Front alliance, which threatens to destabilize his minority government as it struggles to pass a budget aimed at reducing a significant deficit. Despite reassurances from officials about France's economic strength compared to Greece, concerns persist over the country's fiscal health, with a projected budget deficit of 6.1% in 2024 and public debt exceeding 110% of GDP.
The euro has remained above parity with the U.S. dollar since September 2022, but rising tensions with Russia and potential U.S. tariffs under President-elect Trump could threaten this stability. Economists predict the euro may return to parity by 2025, influenced by U.S. monetary policy and global trade uncertainties. The outlook remains volatile, with factors such as tariffs and economic responses from Europe and China playing crucial roles in the euro"s future trajectory.
Euro-yen is gaining attention as the European Central Bank and Bank of Japan pursue diverging monetary policies, creating potential trading opportunities. Analysts from Rabobank, Nomura Securities, and Mizuho Securities predict the euro-yen could fall to between 140 and 150 by the end of next year, a level not seen since June 2023, while it currently stands around 164.
Ghana's Cocoa Management System (CMS) aims to enhance cocoa traceability and comply with EU deforestation regulations, having already registered 793,000 farmers and mapped 1.2 million hectares. A proposed one-year delay in the EU's deforestation regulation implementation could provide Ghana additional time to finalize the CMS and improve logistics. This extension is also crucial for Tanzania, where coffee farmer registration is just beginning.
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