Mikkel Rosenvold
2 days ago

What will be the consequence of European Right-Wing Surge?

Analyst Mikkel Rosenvold gives his weekly round-up of current geopolitical events relevant to investors

Recent European Parliament elections have seen significant gains for right-wing and populist parties across member states like Germany, France, and Italy. These parties have capitalized on public discontent with EU policies on immigration and climate action.

Analyst Mikkel Rosenvold explains that this shift is driven by anti-immigration sentiment and opposition to aggressive climate policies. Despite their electoral success, right-wing parties often struggle to form cohesive parliamentary groups, limiting their policy impact. The resignation of the Belgian Prime Minister and upcoming French elections will further test the strength and influence of these parties. Historically, such political shifts have led to sell-offs in EUR assets due to increased fragmentation risks within the Union.

EU Tariffs on Chinese Electric Vehicles

The European Commission is expected to announce tariffs on Chinese electric vehicles (EVs) due to excessive subsidies. This move follows the US decision to raise duties on Chinese EVs to 100%, although the EU is likely to set lower tariffs.

European automakers, particularly in Germany, are wary of these tariffs due to their reliance on the Chinese market. The expected tariffs of 10-25% could cost EU importers about $1 billion for every 10% increase. The Commission's decision will precede the July 4 deadline for provisional measures, with final duties determined by October. Market reactions and potential retaliatory measures from China could impact various sectors.

India’s Unprecedented Heatwave

India is experiencing a severe heatwave with temperatures exceeding 45 degrees Celsius (113 degrees Fahrenheit), disrupting agriculture and increasing energy consumption.

The heatwave's impact is significant politically and socially, highlighting India's climate vulnerability. Agricultural commodity prices may rise, and energy sector stocks could see increased demand. The government's response through subsidies, infrastructure investments, and climate policies will be crucial. This situation may prompt greater international collaboration on climate issues.

African Continental Free Trade Area (AfCFTA) Expansion

The African Union announced that 31 countries will join the AfCFTA Guided Trade Initiative in 2024, up from seven in 2023. This expansion aims to facilitate intra-African trade with tariff preferences.

However, infrastructure inadequacies and non-tariff barriers remain significant challenges. While increased trade can drive growth in sectors like manufacturing, agriculture, and services, substantial investment in infrastructure and capacity building is necessary. Investors might remain cautious until more tangible results are evident.

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