Take 5 and come back tomorrow (10/6/24) Markets Wages Politics European elections Utilities

None of what follows is investment advice.

Market environment: Looking West - (Asia-Pacific markets were little changed with European futures down and those for the US flat) – Asia-Pacific markets were little changed (many closed for holidays) with investor focus on US economic growth and the results of the European Parliament elections. Futures for Europe are down and those for the US flat.

Response to the crisis: Someone has to pay - (The IMF warns that wages will bear part of the cost of lowering the working week to 37.5 hours (Cinco Dias Sat p26) – Lowering working hours without a wage adjustment would lead to significant pressure on corporate margins, especially in labour intensive sectors, leading to a loss of current and potential employment. For many it is hard to accept that one of the main reasons that employment remains strong is that labour is relatively cheap, after having fallen behind inflation.

Politics: Biting the hand that feeds - (The new Catalan regional parliament term in office begins with a new act of defiance of the Constitutional Tribunal (Expansion p26) – The main selling point (for those buying) of the amnesty granted to those participating in the illegal Catalan independence coup was that it would lead to “reconciliation” and a lowering of tensions within the region and with the central government. The first major decision taken by the pro-independence parties in the regional parliament is to ignore the Constitutional Tribunal ruling that excludes two of their deputies from voting as a result of residence issues. Defiance of the Constitutional Tribunal (which is likely to have to rule on the constitutionality of the amnesty) does not sound like a recipe for stability, or “reconciliation”.

European elections: Spain is stuck - (The PP wins the European elections in Spain with a 4-point lead over the Socialists who resist, and the Government junior partner Sumar deflates (Expansion p18) – Spain stands out as an exception in the EU, given that far-right parties did not make major gains on Sunday’s European Parliament elections. Even from a domestic politics point of view the message was also muddled, as not only did the mainstream parties still account for the large bulk of votes, but neither was there a significant change in their correlation of forces. The PP saw a sharp rise, but less than initially expected, especially given recent allegations of government corruption, and the Socialists held on, largely at the expense of their far-left allies, but did not get a resounding vote of confidence in the face of the same allegations. If extrapolated to national elections, the European Parliament elections would point to a slim majority for a PP-Vox coalition. Spain is stuck.

Utilities: Keep the lights on during the day - (The solar PV boom urges a reform of access and other fees in order to channel consumption to solar hours (Cinco Sat Dias p4) – The idea is to align demand with renewable (solar) generation in order to profit from the cheaper generation prices when renewable generation is abundant (during the day). It could not be easier, just make sure that the lights only stay on during daytime.