Spirit of Debate in France (CAC40)

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Boeing (NYSE:BA) is set to create a multibillion-dollar problem for Airbus (EPA:AIR) after buying back Spirit AeroSystems (NYSE:SPR), a key supplier to both companies in a $4.7 billion deal. The total value of the deal is close to $8.3 billion including debt. This decision follows the diversification of the business over the years into plants in the USA, Northern Ireland, France, Morocco, Scotland, and Malaysia among others. The compensatory settlements for Airbus are $559 million, and the management of its main operations in the four supplier plants in the US, Northern Ireland, France and Morocco. Basically Airbus is trying to clean up its image after the debacle of its stock market crash, something that is affecting Airbus as well since most of the quality problems came from its main supplier.

Added to this is the atmosphere of political change of course in the French elections, with Le Pen's party in the lead, but far from the absolute majority, obtaining 33% of the votes. Even with the help of the Republicans, the figures are not enough to govern, but it is true that the left and the liberals do not have enough to form a government with 28% of the New Popular Front. The last word remains for the traditional conservatives. Emmanuel Macron reached 20% of the votes. The promise that virtually all left and right coalitions promise to increase public spending has not helped calm markets, as the French budget deficit has already led the EU to recommend disciplinary measures. This may generate further volatility in the markets ahead of next Sunday's run-off, which is the final kick-off for alliance-building.

These results have caused the euro to gain strength and to reach a two-week high, while the CAC40 has traded higher at the beginning of the week, partially recovering from losses of around -7.34% since May 15 and around -3.54% since the dissolution of the parliament on June 9. The current range is at a high of 8,271.5 points and a low of 6,950.5 points. There have been two bounces in the support zone of 7,477.8 points. The checkpoint zone is 7,648.5 points with a very smoothed bell. It is possible that the price correction signal given after such a bullish opening will make the price touch the resistance zone again where two possibilities could be seen, a positive one with a right wing government heading to highs if the agreement does not imply so much public spending. And a pessimistic one with a left-wing coalition government facilitating the continuation of such public spending.

What is clear is that the news for Airbus will affect the Paris index and the CAC40 since it is not beneficial for Airbus to have to increase its investment in the management of a supplier that was considered consolidated.

Ion Jauregui - ActivTrades Analyst




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