And finally…. France’s stock market has ended a choppy week, deep in the red.

The CAC 40 stock index fell 2.7% today, taking its losses this week to over 6%, as worries over the upcoming national assembly elections revive market memories of the UK budget rout of 2022.

The premium charged for lending to France, over Germany, remains at a seven-year high too (see earlier post for details).

As Bob Savage of BNY Mellon puts it:

The biggest story of the week is in France post the EU parliamentary vote and the Macron snap election call.

The spread between German and French bonds is up 27 basis points in the week back to 2017 highs – trading 95bps today. The FinMin LeMaire warns of a financial crisis.

More here:

And here’s the rest of today’s business news:

The sandwich maker Greencore, which supplies big supermarkets including Tesco, is one of a number of companies recalling products after being potentially linked to a recent UK outbreak of E coli that caused dozens of people to be hospitalised.

It is understood that the company, which also supplies Asda and Sainsbury’s, is recalling thousands of items, including at least 30 different sandwiches and wraps containing a certain variety of salad leaf linked to the outbreak identified this month by the UK Health Security Agency (UKHSA).

The other manufacturers issuing recalls have yet to be identified as investigations are ongoing into exactly which products have been affected.

Sources said the items being recalled were not believed to contain E coli, as the batch of leaves affected has now been used up, but customers and retailers are being asked to return the items as a precaution.

More here.

Norwegian energy giant Equinor has suspended efforts to sell a stake in the giant Rosebank oil development in the UK North Sea due to fiscal uncertainty ahead of next month’s general election, sources close to the matter have told Reuters.

In its manifesto, the Labour Party has pledged not to issue new licences to explore new fields in the North Sea, arguing that more drilling there would not cut bills and would accelerate the climate crisis.

The Conservatives, though, are pledging to conduct annual licensing rounds of oil and gas production in the North Sea.

French finance minister Bruno Le Maire added to the jitters in the markets today, by warning of the risk of a financial crisis if the far right were to win snap elections in the coming weeks.

Le Maire told franceinfo radio early this morning that:

“When I look at the far right, I see a program that is made of lies,”

And he urged voters instead to back President Emmanuel Macron’s centrist party’s candidates.

Marine Le Pen’s National Rally (RN) party has promised to cut electricity prices, and lower the VAT on petrol, and increase public spending on services such as health.

Ouch. The selloff in Paris is gathering pace, sending the Cac40 index down by 2.3% today.

Politicial uncertainty is hurting stocks, with investors anxious that Emmanual Macron’s centrists could lose badly in the upcoming parliamentary elections, spelling the end of pro-growth reforms.

Holger Schmieding, chief economist at Berenberg bank, suggests the consequences could be more wide-ranging, and suggests three potential scenarios:

1. France ends up with a hung parliament in which neither the far right nor the united left nor Macron’s centrists call the shots. Amid gridlock, not much would get done, but no major reforms might be reversed either. The required fiscal consolidation would become even more difficult. At the EU level, further progress towards capital markets union, common defence projects, EU enlargement and other initiatives may stall. That would be unfortunate, but probably just about bearable.

2. Marine Le Pen and her allies can determine the shape of the next government, and of fiscal and economic policies. However, if Le Pen then focusses on her main goal, winning the 2027 presidential election, she might still choose to not rock the boat too badly, concentrating on some signature policies (eg being tough on immigration) rather than on expensive or disruptive promises. If so, the result may be close to the first scenario: no more reform progress, but only a few damaging reversals.

3. However, if Le Pen calls the shots in parliament and pursues major parts of her expensive fiscal and protectionist “France first” agenda, the result could be a Liz Truss-style financial crisis. At the moment, we rate this as a serious risk, not as a forecast.

It’s also been a strong week for the pound against the euro.

Sterling is on track for its biggest weekly gain against the euro in nearly seven months on Friday, up almost 1% since Monday morning. That would be the best performance since the last week of November 2023.

The pound is trading at €1.1887

The gap between French and German borrowing costs has blown out to its highest level in seven years this morning.

Investors are piling into safe-haven German debt today, amid anxiety over the French parliamentary elections.

French bond prices tumbled on Monday, after president Macron called snap elections. There’s been a modest recovery since, but not enough to repair the damage.

In contrast, German bund prices are rising today, which pushes down the yield (or interst rates on the bond).

So, while German 10-year bunds are trading at a yield of 2.37% today, the French equivalent is 3.25%.

Ad this chart shows, this is the biggest gap between Paris and Berlin’s borrowing costs since 2017.

Jim Reid, strategist at Deutsche Bank, explains:

For reference, the last time it was this wide in 2017 came just before the first round of the presidential election that year, when Macron came first and set up a run-off in the second round against Marine Le Pen. Then spreads tightened again after Macron’s first-round win, as markets moved to price in a strong likelihood of a Macron presidency.

The real concern unfolding is an outright election victory for Marine Le Pen’s RN party in the parliamentary elections, and a move away from the EU’s fiscal rules, says Chris Weston, Head of Research at Pepperstone.

If there was fresh fiscal indiscipline (spending rises or tax cuts), France’s credit rating could be in focus once again.

Weston explains:

It is also worth considering that Le Pen is unlikely to go too hard on unfunded spending measures, as a blowout in the deficit could be taken in a similar light to the disastrous Liz Truss budget in 2022 and result in bond yields on French debt spiking, which would increase interest costs at a time when debt/GDP is looking like it might head towards 140% by 2040.

It would also almost certainly lead to ratings agency Moody’s cutting France’s sovereign credit rating, joining Fitch and S&P who have already done so.

Over in Paris, shares are falling again today as political uncertainty continues to hit the French stock market.

The Cac40 index of the largest companies listed in Paris has fallen by 1.7% so far today, taking its losses this week over 5%.

Stocks have been hit by Emmanual Macron’s shock decision last Sunday to all snap parliamentary elections, which could lead to a win for the far-right National Rally (RN).

Investors fear there could be “policymaking paralysis” if RN held a majority in parliament, leading to a “cohabitation” scenario in which the President is from a different political party to the Prime Minister.

The UK public are increasingly keen for the Bank of England to lower interest rates to help the economy.

The BoE’s latest Inflation Attitudes Survey, released this morning, shows that 42% of people polled thought it would be best for the economy for borrowing costs to come down.

That’s a small increase on February’s 41%, and – Reuters points out – the highest reading since 2008. In contrast, 10% of people thought higher rates would help the economy.

When asked what would be ‘best for you personally’, 24% of respondents said it would be better for them if interest rates were to ‘go up’, up from 23% in February, 31% of respondents said it would be better for them if interest rates were to ‘go down’, down from 32% in February 2024.

The CEO of the firm behind Netflix hit Bridgerton has opened trading at London Stock Exchange today.

Shonda Rhimes is in the City, to mark the return of Bridgerton to UK TV screens – with Netflix claiming that the Regency-style drama (now on its third season) has boosted the UK economy by £275m.

Bridgerton, which is produced by Rhimes’s company Shondaland, has supported 5,000 local businesses over the past five years, Netflix reports. The show has been filmed at many beautiful locations across the UK.

Rhimes says:

The Bridgerton universe occupies a special space in culture, resonating with young and old alike, creating conversation, starting trends and influencing everything from baby names to weddings.

“The shows have also had a seismic impact on the UK economy, boosting it by a quarter of a billion pounds over the last five years and supporting thousands of jobs and businesses.

“It is clear that the business of art and culture can make a huge economic contribution to local communities. I could not be prouder.”

Julia Hoggett, chief executive of the London Stock Exchange, said she was “thrilled to celebrate the significant economic and cultural impact” of the film and creative industries in the UK.

Getting back to Tesco, it has also reported a jump in sales this morning.

In its financial results for the first quarter of the financial year, Tesco says UK like-for-like sales rose by 4.6% in the three months to 26 May.

Tesco says it is growing its UK market share faster than all its “key competitors”, with food sales up 5% in the quarter.

CEO Ken Murphy (he of the controversial £10m pay packet) says:

“We’ve continued to build momentum in the business, with strong volume growth across the UK, Republic of Ireland and Central Europe supported by easing inflation.

We continue to be the cheapest full-line grocer and are the most competitive we’ve ever been, with our value, product quality and service driving better brand perception and customer satisfaction

Not all Tesla shareholders will share Musk’s jubilation, though.

Some, including Norway’s $1.6 trillion sovereign wealth fund and Californian pension fund CalPERS, had said they would vote against the pay deal.

And impact fund Tulipshare is disappointed that its proposal to tie CEO Elon Musk’s compensation to ESG performance was not accepted.

Antoine Argouges, CEO and founder of Tulipshare, says he is “deeply concerned” that Musk’s pay deal was reapproved.

“Once again, Tesla has chosen to bypass shareholder concerns at this year’s annual general meeting (AGM). Although Tulipshare did not secure majority shareholder support for our proposal to link CEO Elon Musk’s pay package to the company’s environmental, social, and governance (ESG) performance, we remain committed to our engagement with Tesla.

“As a shareholder, I am deeply concerned that Musk’s compensation package has been reinstated. I see this move as shortsighted and one that will have detrimental consequences for Tesla’s future. It is imperative for the longevity of the company that Musk’s compensation be tied not only to financial performance indicators but also to ESG metrics, as our resolution suggested. Tesla’s future cannot be predicated on Musk’s erratic behavior and decision-making alone; there must be safeguards put in place to ensure the company’s long term financial stability and sustainability efforts. Musk should not be rewarded for declining earnings. Tesla’s situation has changed from 2018 and the CEO’s compensation package must reflect that.

“Tesla’s poor handling of environmental, social, and governance issues has attracted notable criticism in recent years. In 2021, the National Labor Relations Board revealed that Tesla violated federal labor laws by terminating a union activist. Dozens of workers have also sued the company, alleging that Tesla enables a culture of racism and sexual harassment. Furthermore, Tesla has been battling allegations of child labor in its supply chains for years, as well as alleged improper hazardous waste handling, poor right to repair policies and its failure to develop a low-carbon strategy.

Elon Musk is in jubilant mood after winning a victory last night over his pay deal currently valued at around $46bn.

After shareholders reapproved the mega package, Musk posted a photo of a cake, on with “Vox Populi, Vox Dei”, and a heart, has been written.

Tesla’s CEO says he’s sending it to Delaware – where a judge had blocked the payout back in January, prompting Thursday’s fresh vote to approve it (again).

The voice of the people may well be the voice of God, but whether the Almighty would approve of a near-$50bn pay deal is quite another matter.

Musk hailed his shareholders last night, telling a crowd of investors at the Tesla factory in Austin, Texas:

“We have the most awesome shareholder base. Hot damn, I love you guys.”

Investors also approved a second resolution, to reincorporate the electric-vehicle maker in Texas.

Back in January, a Delaware judge ruled that Tesla’s board could not be considered independent from Musk’s influence and that the process of drawing up the pay package had been illegitimate.

Last night’s vote could serve as a rebuttal to the judge’s ruling that struck down the award – making it easier for Tesla’s board to argue that shareholders were properly informed about the payment package, and the board members’ ties to Musk, before casting their votes.

Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.

Pay packets are in the spotlight today.

While Elon Musk celebrates Tesla shareholders voting to approve his multibillion dollar pay packet, UK supermarket chain Tesco will face criticism over its CEO’s wage deal today.

Tesco must justify Ken Murphy’s £10m pay package at its AGM later today, with responsible investment NGO ShareAction planning to questioning why Murphy’s pay should double when contracted workers at its supermarket are poorly paid.

Although Tesco’s store workers get the voluntary Real Living Wage (which is higher than the minimum wage), ShareAction say contracted staff – such as cleaners and security – don’t

Dan Howard, Head of Good Work at ShareAction, explains:

“In a world where Tesco are making a £2.3 billion profit a year, paying those who keep the stores safe and clean the real Living Wage shouldn’t have to be asked for – it should be automatic.

“Unfortunately, Tesco are dragging their feet on taking the right steps to pay its third-party contracted staff the living wage.

“Failing to recognise the financial hardship many of those who work for Tesco have faced during the cost-of-living crisis will damage Tesco’s reputation with both shareholders and customers.”

We learned last month that Murphy’s pay had swelled from below £5m to £10m, due to bonus payouts.

It means Murphy now earns more than 430 times the average pay at Tesco, up from a multiple of 197 in the previous year.

The payout was blasted by the Unite trade union in May; they called it “a slap in the face” to millions of struggling households who paid for it through higher food bills.

ShareAction is urging major supermarkets including Tesco to accredit as Living Wage employers, which would mean all staff including third-party contractors would be guaranteed the real Living Wage on an ongoing basis, and to set out a timeline for doing this.

Tesco will face questions over Murphy’s pay, and other aspects of the business, at its AGM which begins at 11.30am at its Welwyn Garden City campus.

The agenda

• 10am BST: Eurozone trade data for April

• 9am BST: Superdry AGM

• 11.30am BST: Tesco AGM

• 3pm BST: University of Michigan’s US consumer sentiment index