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Analysis

EU Elections 2024:
Likely outcomes and market response

Disclaimer: This article is an educational guide to CFD trading and the financial markets and should not be considered as advice. Trading CFDs is high risk. Always ensure you understand the potential risks and rewards associated with trading before you trade.

Polling for the next European election

Traders dealing in European markets need to pay attention to the 2024 elections. For European markets, including stocks, bonds, and currencies, a big election can mean big volatility. The outcome of an election is always uncertain, but CFD traders looking for more information have a resource in ADSS.

 

Educated guesses

To trade an election, you need to make an educated guess about two things: the result, and the market’s reaction to it. The first is simpler: polling gives a fairly detailed picture of the likely outcome of the 2024 European parliamentary elections. European political parties form national lists, the major ones of which cooperate internationally to form groups. Looking at the European level, polling describes the likely number of seats for each grouping. Analysts then make predictions about the election based on the relative performance of these groups.  Analysts at the European Council on Foreign relations expect “the EPP to remain the largest group in the parliament, and therefore maintain most agenda-setting power, including over the choice of the next commission president”.

 

Predicting market movements

The market reaction is harder to predict than the election result. Here, traders need to use their own fundamental skills to predict how different policies could influence target markets. The key markets to watch out for are indices, European stocks, and the Euro. Volatility can push markets in either direction. In the long run, this election is not a major event, but the weeks and days that follow it could see big moves in some European markets.

Polling and possible results

To understand this election, you need a little background knowledge of the European Union and its parliament. There are seven groups in the European Parliament. Below is a brief outline of each group, their seats in the previous parliament, and their projected seats based on Europe Elects polling for the 1st of June 2024. For each group, we describe some possible market impacts based on their projected performance. Remember, both polling and market reactions are always uncertain, and markets don’t always behave as you’d expect. Technical and fundamental analysis can help you balance out predictions and form the core of your trading strategy, but they are not foolproof.

 

The European People’s Party (EPP) is the main centre-right group, and current president Ursula von der Leyen belongs to this group. They currently have 176 seats and are projected to win around 181 seats. (Remember: projections are never 100% reliable and can change, even in short time periods.) To govern, they will need to form a coalition with other centrist parties, or perhaps with the conservative ECR group. The EPP is seen as broadly pro-Europe and pro-business, with stock markets and the Euro potentially strengthening if they perform well – but market reactions are never sure and can surprise even seasoned observers.

 

The Progressive Alliance of Socialists and Democrats (S&D) is a centre-left group, the second largest in the current parliament. Right now, S&D is in a coalition with the EPP and Renew. They have 139 seats in this parliament and are projected to win around 136. Though this centrist group does not have the same pro-market reputation as the EPP, it is still considered a competent governing group. Better than expected results by S&D would be unlikely to spook markets, but wouldn’t necessarily be a strong positive either.

 

Renew is a liberal centrist party, forming the smallest part of the three-party governing coalition. Though they have 102 seats, they are projected to win only 85 based on polling at the end of May 2024. Renew describes itself as broadly pro-business and fiscally responsible. If Renew performs badly enough, the eventual coalition may have to include ECR, a much more right-wing group than the EPP that includes some Eurosceptic parties. This could cause increased volatility for the Euro in the days and weeks following the election.

 

The Greens-European Free Alliance are a political group containing many green parties and several regional separatist ones. At the moment, they have 72 seats, but Europe Elects polling indicates they could drop to 54 after the 2024 election. This would take them from the fourth largest group to the sixth. The performance of the green group is relevant to manufacturers and energy companies in the EU. Some member states, notably Poland and Germany, have large manufacturing industries that are negatively impacted by environmental regulation. The Zloty could possibly benefit if reforms pushed by the greens are dropped after the election, but this is very uncertain.

 

The European Conservatives and Reformists are a right-wing, conservative group. They have 69 seats but are projected to make gains in the 2024 election, perhaps moving up to as many as 74 seats. Unlike the ID group, it is plausible that the ECR could form part of a governing coalition with the EPP and other groups. The market reaction to ECR gains or inclusion in the final coalition is difficult to predict, but since this outcome has consistently been polled for months, it is likely to be muted.

 

The Identity and Democracy group is a (far) right-wing group made up of nationalist parties. Now on 49 seats, polls have consistently reported big gains for this grouping in 2024, with Europe Elects predicting 66 seats. This is down considerably on the situation in March and April, when ID was projected to win as many as 90: following the expulsion of the Alternative for Germany in May they have lost their second-largest party. Significant gains for the ID group could be disruptive to markets since centrist parties have so far refused to work with them. It is possible that the Euro could see significant volatility if ID performs well.

 

The Left in the European Parliament is a grouping of (far) left parties, including a mixture of communist, socialist and environmentalist parties. They are noted for being Eurosceptic, and hostile both to free markets and the European Union as it currently exists. They are the smallest group with 37 seats. This is predicted to increase slightly to around 46 seats in 2024. Although the Left group is potentially disruptive for many European stocks, especially financial and defence companies, they are relatively small and isolated so their strong performance will be ignored unless it’s exceptional.

 

Outside of the Parliamentary groups are the Non-Inscrits, an eclectic mix of minor parties that cannot form or join a group. They have 61 seats in the current parliament and are projected to grow to 78. This is largely driven by the expulsion of the Alternative for Germany from the ID group, forcing them to sit as NI. Because the NI group is an ‘anything else’ category, it isn’t possible to say how pro-business they are or predict the market reaction to their projected gains. And since the group is so divided and incoherent, NI winning a significant number of seats may cause wobbles in the Euro, and perhaps EU-Bonds.

 

Trading the EU Parliamentary Elections with CFDs

European elections are complicated and trading them requires some serious background knowledge. For those willing to take the plunge into the inherently uncertain world of trading on predictions, ensure you understand the key issues, policies, and groups involved in these elections. It is also essential to remember that, ultimately, trading news and events are always unpredictable, and even relatively simple elections can cause unexpected market results. CFD traders looking for volatility will find it in the FX, stock and European index markets before and after this election.


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