This past week saw an interesting contrast in two sets of elections, one to determine the future of France and the other that provided an indicator of the political future of Britain as it charts its two year Brexit course in separating from the European Union. While France is deeply divided moving into its future, the United Kingdom is more united behind Prime Minister Theresa May than ever before.
Meanwhile the Brexodus has begun in earnest as JP Morgan became the latest bank to announce figures of advance jobs which will be leaving London for other lesser European financial centers in the imminent future. Potentially tens of thousands of high paying banker jobs are likely departing the United Kingdom as a consequence of the soon to be discussed Brexit.
In the Asian theater, U.S. Secretary of State Rex Tillerson told the foreign ministers of ASEAN that the U.S. is not going to tolerate militarization and land reclamation in the South China Sea in what is a clearly intended warning and threat to China. Everywhere you turn, you see reasons to win over your financial advisor on gold in your portfolio. It’s about time you learn the gold rollover rules and regulations.
In A Tale of Two Elections, France Is Deeply Divided
The polls which had been wrong with Brexit and President Donald Trump’s election in America redeemed themselves in the final round of the French presidential election. Just as they had foretold, centrist Emmanuel Macron triumphed over his far-right nationalist rival Marine Le Pen in an approximately 65 percent to 35 percent final vote tally.
This does not change the fact that Le Pen achieved a growing and all-time high vote for her populist party which has now confirmed its new place as the leading second national party and main opposition party. It is the very first time in French history that two candidates outside of the traditional mainstream political establishment have competed in the final round of the French presidential election.
As the map above shows, on a local level Le Pen secured around a full quarter of the 36,000 communes of France, demonstrating that her campaign succeeded in garnering widespread popular support around the country. Her 10.6 million votes (around twice as many as her father secured in the second round of the 2002 presidential election) show how starkly and deeply divided France remains today. The country is internally torn in terms of rural against urban voters, blue collar against white collar workers, and unemployed against working classes. European inequality is alive and well in France as this final round of the election clearly showcased.
The next election which will determine if winner Macron is able to govern at all is to be held next month in the parliamentary elections. Five major parties are contesting the 577 seats of the General Assembly. This means that the chances of Macron winning a clear majority which he needs to rule as more than a figurehead are bleak. It is not only Le Pen’s rising National Front he has to compete against for parliamentary representatives (of which Le Pen currently has two and Macron has zero). He must also battle all at once the traditional left-leaning socialists, right-leaning conservatives, and energized far-left party of Melenchon, who took nearly 20 percent of the first round presidential popular vote.
Le Pen is most powerful in the rusting industrial north of the country and the conservative southeast where globalization and deindustrialization have created powerful negative establishment sentiment and shockingly high unemployment that refuses to get better. Melenchon has a strong following in the southwest and east of Paris. The conservatives are still represented in the south and west-center. Look at this map of the first round election and you will see the obstacles that these parliamentary elections pose for Macron:
This bears close watching. Macron’s victory Sunday night was only the beginning of his struggle to claim his ruling place in the history of the Fifth French Republic. If he does not win a clear majority in the General Assembly in June, the country will effectively be paralyzed for up to the next five years till the 2022 presidential election.
While In Britain It’s A More Than Ever United Kingdom
Meanwhile over in Britain, the same week saw a sweeping and game changing victory for Prime Minister Theresa May’s ruling Conservatives, the historical scope of which pre-dates the Second World War when Great Britain was still an imperial power around the globe. It took only a single election for the Conservative Party to seize control of large parts of Labour’s longstanding heartlands across the working class counties and districts of the industrialized North and Midlands. The political map has now been reconfigured along the results of the Brexit vote, which massively favors the Conservatives of Theresa May on a Parliamentary district basis.
This foreshadows Prime Minister May trouncing her rivals in a landslide victory with the upcoming national election scheduled for June 8th. She is seeking a larger mandate in Parliament so that she will be able to arrange the Brexit negotiations without hindrance and carry out her own carte blanche domestic policies. May has kept up an unrelenting assault on the “Brussels bureaucrats” this last week to help ensure this first victory translates into a far greater one next month.
More International Banks, Insurers, and Asset Managers Prepare Their Brexodus from London
The latest major banking giant to announce significant job moves from London as part of the growing Brexodus is JP Morgan Chase & Co. They stated their intention this past week to move hundreds of their London headquartered banking staff to growing offices in Frankfurt, Germany; Dublin, Ireland; and Luxembourg to maintain their seamless access to the common market of the EU following the Brexit. This will be between 500 and 1,000 of their banking staff who are leaving for now. The company’s Head of Investment Banking Daniel Pinto stated:
“We are going to use the three banks we already have in Europe as the anchors for our operations. We will have to move hundreds of people in the short term to be ready for day one, when negotiations finish, and then we will look at the longer-term numbers. We have to plan for a scenario where there is no U.K.-EU passporting deal, and we have to move a substantial portion of our business to continue serving our European clients. We’ll have to wait to see what kind of deal can be achieved and see what we need to do from there.”
It is not only JP Morgan Chase which is busily making plans to move some of their highly paid financial services staff away from the global banking center in London and the United Kingdom. Other global banks and insurance companies are also detailing their plans little by little. JP Morgan CEO Jamie Dimon said to his British employees in January that the numbers which might be relocated to their three other centers could be lower or higher than 4,000 staff. The final numbers will come down to how the negotiations between Britain and the EU end.
Look at the numbers of positions so far which will be moving from the major international banks with significant operations in London in this graphic:
In the past two weeks, Deutsche Bank AG of Germany stated it will likely move a full 4,000 staff members from London while Barclays stated it will have its contingency plan activated in six months or less. American-based investment bank Goldman Sachs Group Inc is planning to start relocating its positions from London in 2018.
Dublin and Frankfurt are the big winners of the Brexodus so far. Barclays is leaning towards Ireland’s capital city while Standard Chartered PLC, Morgan Stanley, and Goldman Sachs are all scouting out Frankfurt, Germany. Asset managers and insurance companies with customers on the continent are mostly following the lead of American International Group, Inc. in its declaration from March 8th that it will open up an EU-wide operation in Luxembourg.
Just this past week, Michael Barnier the Brexit Chief Negotiator for the EU eliminated all hopes of an immediate deal on any transitional arrangements for the British departure from the common market. This has been the main demand of all finance firms with significant EU operations in London. This is part of the reason why Bruegel think tank estimates that London will lose a good 10,000 jobs in banking and another 20,000 positions from financial services.
U.S. Secretary of State Tillerson Threatens China on South Sea Military Buildup
In what is a continuing situation to watch between the United States and China, the American Secretary of State Rex Tillerson gave out what he called an “emphatic” statement to the Southeast Asian foreign ministers last week at the Thursday ASEAN lunch meetings in Washington, D.C. He all but demanded that construction and militarization of the South China Sea has to stop until the area territorial disputes are negotiated.
This is a hard line message directly intended for China. The rising Asian economic and military power has now reclaimed literally thousands of acres in the South China Seas over the last few years. Deputy Assistant Secretary of State for East Asian and Pacific Affairs Patrick Murphy told reporters that Secretary of State Rex Tillerson urged:
“All parties involved to stop militarization, construction, reclamation of land in the South China Sea while talks are going on… Our objectives remain very firm in this regard, and the United States will continue to assert its rights in the South China Sea.”
This followed the earlier comments from Secretary Tillerson at his confirmation hearing where he warned ominously:
“We’re going to have to send China a clear signal that, first, the island-building stops and, second, your access to those islands is also not going to be allowed.”
Critical observers have opined that such remarks envision an inevitable military conflict with China over the South China Sea. Now is the time to secure some gold to protect your retirement portfolio. Gold offers insurance and protection during market turbulence. Learn how to invest in gold while you still can.