Stock markets surged and the euro jumped sharply after centrist candidate Emmanuel Macron won the first round of the weekend’s presidential election, easing fears of a victory by the far-right Front National.
France’s Cac index climbed more than 4.5% to a nine-year high of 5,268 as investors bet that Macro would now defeat the other runoff candidate, the FN’s Marine Le Pen in a fortnight’s time. The first vote put Macron on 23.75% with Le Pen on 21.53%. The result was seen as the most market friendly outcome, putting the independent former investment banker Macron in pole position to fend off the anti-EU Le Pen.
The euphoric mood spilled over into other stock markets, with Germany’s Dax up 2.9% to a new peak and the FTSE 100 recovering 1.8% with banking shares leading the way. The FTSE 250 added more than 1% to hit its own record high. In Asia, the Nikkei 225 ended up nearly 1.4%.
The Stoxx 50 index of European shares is on course for its best day since August 2015, up around 3.8%.
Meanwhile, the single currency is around 1% better against both the pound and the dollar after earlier hitting a five-month high, although analysts cautioned that it was likely to remain volatile ahead of the latest European Central Bank meeting on Thursday. French government 10-year bonds rose to three-month highs, as recent concerns about the election eased.
Gold, traditionally a haven for investors in times of uncertainty, remained steady at $1,270 an ounce.
Michael Hewson at CMC Markets said: “For markets this was always the least bad option, with most expecting Mr Macron to become president in two weeks’ time as the other candidates endorse him over Marine Le Pen.”
However, he added: “For all his market and EU friendly rhetoric Emmanuel Macron will face the same problems previous French presidents have faced, which means he will have to reach out across the political divide. This lack of support is likely to make him a lame duck president, only able to affect minor tweaks or changes.”
Trevor Greetham, head of multi asset at Royal London Asset Management, warned: “It’s worth noting that the French election is likely to be the first of several risks to test markets as thin summer trading comes into view. Signs of a temporary peaking out in global growth, the impact of tightening moves in China and, first up, a potential government shutdown in the US at the end of this week, mean investors can’t pop the champagne corks just yet.”