French share prices jump after elections; Port Talbot steel union suspends strike – business live | Business

Tata Steel had written to the three main unions representing steelworkers at Port Talbot offering more talks over its plans to cut 2,800 jobs as it closes the blast furnaces if the strike threat were removed.

The unions are hopeful that a Labour government would persuade Tata Steel to delay the closure of at least one blast furnace, preserving thousands of jobs for several years.

Unite had threatened strike action from 8 July – after the planned closure of the first blast furnace. The other unions were hanging on for a Labour government after 4 July. Shadow business secretary Jonathan Reynolds has already been in talks with the unions and the company in an effort to avert the closures.

Alun Davies, national officer for Community, which represents most of the affected steelworkers, said:

With thousands of jobs at stake, we welcome Unite’s decision to withdraw their strike action and get back around the table with their sister steel unions.

Tata confirmed that if the strike was called off they are ready to resume discussions on a potential [memorandum of understanding], through the multi-union steel committee which is chaired by Community.

The truth is Tata never walked away from those discussions, and at our last meeting on 22 May all unions agreed to conclude the negotiations and put the outcome to our members. Community will welcome resuming those discussions, but we regret that zero progress has been made since 22 May.

Port Talbot steelworks union suspends strike threat

There has been a rush of manufacturing data today. The UK’s purchasing managers’ index (PMI) from S&P Global suggests it is doing better than Europe.

The PMI reading came in at 50.9 in June, still well into expansionary territory, in contrast to the two-year contraction in Europe. The reading was worse than the initial flash estimate of 51.4, and down slightly from May’s 22-month high of 51.2.

Rob Dobson, director at S&P Global Market Intelligence, said:

The UK manufacturing sector is enjoying its strongest spell of growth for over two years, with June seeing output and new order growth sustained at robust rates similar to May’s recent highs. The performance of the domestic market remains a real positive, providing a ripe source of new contract wins. In contrast, the ongoing weak export performance is concerning, with manufacturers reporting difficulties in securing new business in several key markets including the US, China and mainland Europe.

However, that did not stop companies from making job and spending cuts and trying to run down inventories of unsold products, Dobson said. Inflation may be partly behind that:

This is coming from a backdrop of renewed cost inflation pressure, with manufacturers’ input prices now rising at the quickest pace since the start of 2023. This renewed upward lurch in manufacturing prices will likely add to concerns over the potential stubbornness of underlying inflationary pressures among hawkish rate setters at the Bank of England.

It’s a big news day for what remains of Northern Irish manufacturing: first, we had the news that Airbus will take over the historic Shorts aerospace operation from Spirit Aerosystems. And now there are renewed questions over the future of the nearby Harland & Wolff site, after its shares were suspended on the London’s junior stock market.

It has been forced to temporarily suspend trading in its shares after accounting issues meant it was unable to file audited accounts on time, the Guardian’s Jack Simpson reports.

It expects to publish the accounts in the week commencing 8 July, with share trading resuming at that point.

The Belfast-based shipbuilder was plunged into uncertainty last month when it was reported that the UK government was witholding the approval of a £200m loan guarantee promised in December to shore up its finances.

You can read the full report here:

France’s Cac 40 up 1.5%; euro gains 0.5% against US dollar

On the French election, Swiss investment bank UBS said there is uncertainty over what will happen in the second round because of 250+ “triangular votes”, with second rounds contested by three candidates.

But the UBS analysts, led by Claudia Panseri, chief investment officer at UBS Wealth Management France, say that “the probability that no majority emerges from the election appears significant”. (And on that basis they tell investors to avoid overreaction in the coming days.)

The reach of the French far right will depend in part on whether other parties work together to stop them, UBS said:

By 6pm on 2 July, the candidates will need to confirm if they want to enter the second round or withdraw and lend their support to another candidate. It will also be important to see whether the various parties will give explicit guidance to their voters on which candidate to vote for in the second round in constituencies where their own candidate fared less well. Gabriel Attal, France’s prime minister, has called on members of his party who came in third to withdraw in favor of a “candidate who defends the values of the Republic”. For now, the left is calling on its third-placed candidates to withdraw in order to defeat the RN.

But either way, a “period of political instability” is very likely, they write in a note to clients.

France’s main stock index may have gained this morning, but UBS is cautious about the implications for company share prices, because uncertainty will be the name of the game for at least a week, and possibly longer. They wrote:

The poor showing by Macron’s Ensemble alliance in the first round is likely to mean that French and Eurozone equities struggle to recover some of their recent losses. […]

Fiscal worries will also likely remain until there is greater clarity after round two, preventing a larger rebound in stocks vulnerable to fiscal worries, such as financials and defense stocks. We expect European markets to stay volatile given there is still elevated uncertainty heading into the second round.

UK mortgage approvals dipped slightly in May, but were right in line with expectations, according to new data from the Bank of England.

Net mortgage approvals for house purchases fell from 60,800 in April to 60,000 in May, while approvals for remortgaging decreased slightly from 29,900 to 29,600 over the same period, the Bank said.

Holger Schmieding, chief economist at Berenberg, a German investment bank, said the French election result was “not worse than expected”.

Marine Le Pen’s National Rally (RN) and its allies received 33% of the national popular vote, with the leftwing New Popular Front in second with 28%. President Emmanuel Macron’s centrist bloc was third on 20% of the vote.

Schmieding said RN’s vote share was two points below opinion polling, meaning “a hung parliament remains the most likely outcome”. RN could still win an absolute majority in the second round on Sunday 7 July, but that “now looks even slightly less likely than it did before”, he wrote in a note to clients.

He also noted that the possibility that the leftwing coalition could “take power and implement its costly agenda seems to have receded further”. (Investors have generally not been in favour of the potentially free-spending leftwing coalition.)

Schmieding sketches out three scenarios (quoted here in full):

1. Gridlock: The most likely outcome remains a hung parliament in which neither the far right nor the united left nor the Macron’s centrists can muster a majority. In this case, any (new) government would not get much done.

2. Worse than gridlock: Although the united left and RN are polar opposites on issues of migration, culture and identity, they have all opposed Macron’s pro-growth reforms. As a result, we see a risk that Le Pen’s party and parts of the left may still join forces in a hung parliament on a few select issues to soften Macron’s pension reform and enhance the “purchasing power” of citizens, for instance through lower VAT on energy products or via additional subsidies.

3. Marine Meloni: With a significantly lower probability than the first two scenarios, Le Pen’s party may still win a majority of seats and install RN boss Jordan Bardella as prime minister. If so, she would probably focus on winning the 2027 presidential election, staying on the more moderate track which she has signalled during the campaign. She may concentrate on some signature policies (e.g. being tough on immigration) rather than on expensive or disruptive fiscal promises. Put differently, Le Pen may try to largely follow the example of Italy’s prime minister Giorgia Meloni. To do so, she may possibly explain to RN voters after a lengthy fiscal review that most of her original fiscal ideas could only be implemented slowly over time – or only if she became president in 2027.

Schmieding sees “a change for the worse” after Macron’s “pro-growth economic reforms”. He thinks they will mean higher spending relative to government income, plus a much more combative relationship with the EU.

Back on the French election fall-out, let’s look at what economists have had to say this morning.

Marine Le Pen, leader of the victorious National Rally, formerly called for France to leave the euro currency and the EU. She has done her best to distance herself from any anti-euro sentiments in recent times, realising they are unpopular with people whose savings are in euros, but concerns over the future of Europe have been a major part of investor concerns over a far-right government.

A hung parliament – as indicated by the first round of voting – would assuage some of those concerns. However, it could also stop Macron from making changes such as pension reforms that might boost economic growth, but which have proven unpopular with voters.

Mohit Kumar, chief economist of Jefferies investment bank, said:

The result is probably better-than-feared, but not as good as the status three weeks ago pre-elections.

We could still be looking at the next few years of political paralysis in France with a stalling of the reform process. However, any fears of Frexit or a euro area breakup would be unfounded.

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French banks are leading the gains on the Cac 40 index in early trading, as investors predict a hung parliament following the first round of parliamentary elections.

The share price of every company in the French benchmark index has risen so far today.

Société Générale is the top gainer, up 6.4%, with Crédit Agricole and BNP Paribas both up 4.8%.

French airports and construction company Vinci, which has a large number of government contracts, is up 4.9%. Energy utility Engie and waste and water company Veolia have risen 4.5% and 3.7% respectively.

The FTSE 100 in London has also gained in the first few minutes of trading.

It is up 0.6%. The biggest riser is property investment trust Landsec, up 3%, followed by energy company Centrica, up 2.4%.

France’s Cac 40 index surges 2.6% in early trades

Euro hits two-week high after first round of France election