Far-right advances in European Parliament elections

Good morning. Here's what happened overnight and what you need to know today.

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1.

Europe's right-wing tilt: European voters across 27 countries mainly supported centrist parties at the European Parliament elections last week, though far-right factions made significant advances in the EU's core nations of France and Germany. Centrist groups are set to retain over 400 seats in the 720-seat assembly, but the rise of far-right parties has unsettled the mainstream. In France, Marine Le Pen's far-right National Rally won about 32% of the vote, more than twice that of the president’s centrist liberal party. Germany's far-right AfD party also had a strong showing, as did Austria’s far-right party Freedom Party. Right-wing parties are now expected to hold around 130 seats. The result raises concerns about future EU policies, especially on climate and immigration. Ursula von der Leyen, European Commission President, called for centrist unity to ensure stability and effective governance. (The Guardian) (New York Times)

2.

Macron’s maverick gamble: After a severe defeat in the European Parliament elections, French President Emmanuel Macron plunged his country into political uncertainty, dissolving the National Assembly and calling for snap legislative elections. The June 30 and July 7 elections reignite his rivalry with far-right leader Marine Le Pen and could shift power to her far-right National Rally (RN), posing a significant challenge to Macron’s political agenda. Despite maintaining his role as president, Macron’s ability to pass legislation and appoint a prime minister is at stake. Macron’s office said the decision to dissolve the National Assembly was justified by the “historic score of the far-right” that could not be ignored. Following the European Parliament results and Macron’s move, the euro lost 0.5%, French bonds fell and the country’s CAC 40 stock index declined by as much as 2.3% before closing 1.4% lower. French banks saw the steepest falls, with BNP Paribas shares plunging as much as 8.8% before closing down 4.76%. Société Générale stock fell 7.46% and Credit Agricole shares were 3.59% lower. (Bloomberg)

3.

Netanyahu’s rival quits: Israeli minister Benny Gantz, a centrist rival of Prime Minister Benjamin Netanyahu, quit the country’s emergency government and called for elections, criticising Netanyahu’s handling of the war against Hamas. Gantz’ exit removes a key moderate voice from power, increasing Netanyahu’s reliance on right-wing partners. Gantz, leading in polls as a potential prime minister, supports a ceasefire deal proposed by the US. He had set a deadline for Netanyahu to devise a post-war strategy for Gaza, which was ignored. “Fateful strategic decisions are stuck due to hesitancy and procrastination out of political considerations,” Gantz said in a televised address. Far-right leader Itamar Ben Gvir demanded Gantz’ place in the war cabinet, while Netanyahu urged unity. Gantz’ role as a US confidant will be missed as US Secretary of State Antony Blinken arrives in the Middle East to salvage ceasefire negotiations. (Bloomberg) (Reuters) (Wall Street Journal)

4.

Apple unveils AI push: Apple has officially entered the generative artificial intelligence race, announcing plans to integrate the technology into over a billion iPhones worldwide. During a two-hour presentation, Apple introduced "Apple Intelligence," a system designed to enhance messaging, notifications, writing tools, and significantly upgrade Siri, its virtual assistant. Emphasising privacy, Apple stated that sensitive tasks would be processed on the device rather than in data centres. “Built in a uniquely Apple way, we think Apple Intelligence is going to be indispensable to the products that already play such an integral role in our lives,” Apple CEO Tim Cook said. Apple had lagged other major tech companies in detailing its generative AI strategy, and shareholders did not seem impressed on Monday. Apple shares fell as much as 2.4% to USD192.15 ($290) each following the announcement. The company has partnered with Open AI to integrate ChatGPT into their devices later this year. Apple also unveiled software improvements for the iPhone, introducing message scheduling, additional emojis, a redesigned Photos app and high-resolution image sharing with Android phones. (New york Times)

5.

Southwest investor turbulence: Activist hedge fund Elliott Investment Management has acquired nearly USD2 billion ($3 billion) in shares of Southwest Airlines, the largest domestic airline in the US by passengers carried. The stake makes Elliott one of Southwest’s largest investors. The fund is calling for the replacement of CEO Bob Jordan with an external candidate and wants to overhaul the board. Southwest has lost over half of its market value in the past three years and Elliott wants to revamp its leadership to boost its financial and stock performance. Shares rose over 8% after the Wall Street Journal reported the stake. Well known in Australia for its campaign targeting BHP in 2017, Elliott sees potential in overhauling Southwest’s strategy to enhance profitability and competitiveness. Jordan, who took over in 2022, faces increasing pressure to navigate a string of obstacles and revitalise the airline. The company's ongoing challenges include high costs from new labour contracts, expensive technological upgrades and delayed aircraft deliveries from Boeing. (Wall Street Journal)

6.

Tesla’s payday: Elon Musk criticised Norway's USD1.7 trillion ($2.6 trillion) sovereign wealth fund for its decision to vote against his multi-billion Tesla pay package, calling the move "not cool" and claiming public support. The fund, Tesla's eighth-largest shareholder, cited concerns over the award's size, structure, dilution and lack of mitigation of key person risk. Shareholders will vote on Musk’s pay, the company's reincorporation in Texas and the re-election of directors at its annual meeting this week (13 June). Retail investors, who largely favour management but often don’t vote, are being targeted through an extensive outreach campaign. Institutional investors are divided, with T. Rowe Price supporting the pay package while the California Public Employees' Retirement System and Norway's fund oppose it. Proxy advisers Institutional Shareholder Services and Glass Lewis recommend voting against it, deeming it excessive. With Tesla facing growing competition and challenges, the uncertainty of the outcome and its implications for the company’s direction and Musk’s leadership is weighing on Tesla shares. (Investor's Business Daily) (Reuters)

7.

Harvey's USD2b leap: The generative AI legal startup Harvey is in discussions with investors to secure a USD600 million ($908 million) funding round earmarked for strategic acquisitions, The Information reported. The raising by the San Francisco firm, whose stated mission is “to give lawyers superpowers,” comes after three investment rounds in just over a year. The new funding is at a valuation of at least USD2 billion, the publication reported, citing a person involved in the discussions. That would be more than double its December valuation of USD715 million. If successful, executives have told potential investors the proceeds could fund the purchase of vLex, a 25-year-old legal research service majority owned by private equity firm Oakley Capital, to “train” Harvey, the publication said. The funding round will be led by venture capital firm Kleiner Perkins, which plans to invest USD100 million. (The Information)

8.

Index-driven rally: Shares in private equity firm KKR, cybersecurity company Crowdstrike and web hosting company GoDaddy rose to record highs on Monday, US time, following news that they will join the S&P 500 index later this month. KKR shares surged almost 13% to $110.72 ($167.5) each, a record high pushing its market capitalisation to over USD100 billion. The inclusion makes KKR the second publicly listed alternative investment group in the index, following Blackstone's addition last September. CrowdStrike and GoDaddy rose over 10% and 2% respectively. The index's quarterly rebalance will take effect on June 24, prompting index-tracking funds to buy the companies' shares. Elsewhere in US markets, the S&P 500 edged 0.26% higher ahead of this week’s Federal Reserve policy decision and key inflation data due on Wednesday. The tech-dominated Nasdaq was 0.30% higher shortly before the close, with Nvidia shares about 1% higher following their 10-for-1 split on Friday. (Wall Street Journal)