Relief Rally In French Stocks, ‘En Marche’ To Round Two
The outcome of the first round of voting in the French presidential election was sans major surprises. Pro-growth and centrist Emmanuel Macron came out in pole position followed by far-right Front National’s Marine Le Pen in the two-part contest.
The focal point is Le Pen's approximately 25 percent polling deficit to Macron for the second round, which will take place in two weeks’ time.
The large part of the action will be seen in the currency and the bond markets, which would like to price in the second round outcome immediately.
Since the markets had already embedded a risk premium of a Le Pen victory, and since the chances of a Le Pen win over Macron are not the strongest, the long euro-dollar trade is likely to be rewarded.
The equity market too seems to be taking the event positively. At about 6 pm IST, the CAC of France was trading about 4.5 percent higher, with the other European indices not too far behind. The gains may not last for too long, but should Macron win the second round as well, expect further bullish activity in all asset classes which haven’t fully priced in a Macron win.
For lovers of statistics – since April 1988, the performance of the CAC on Day 1 post the first round of voting has been in the negative. In effect, the CAC ended in the positive on Monday, reversing a 29-year old trend.
Niraj Shah is Markets Editor at BloombergQuint.
This article has been updated to reflect the closing price of the French benchmark index.