Cac 40: The markets not surprised by the qualification of Le Pen against Macron in the 2nd round

(BFM Bourse) – The arrival of the National Rally candidate in the second round for the second time had been widely anticipated by investors.

No surprise for the second round of the presidential election. As predicted by the polls, it was outgoing President Emmanuel Macron (LREM) who came out on top in the first round of the presidential election (with 27.85% of the vote), followed by the candidate of the National Rally Marine Le Pen (23.15%). If the push from Jean-Luc Mélenchon, who comes just behind (21.95% of the vote), was less expected, with regard to the headliners called to face each other in the second round, it is the predicted scenario that s is materialized. And in fact, the markets are digesting the news on Monday without flinching.

After hesitating a little in the morning, the Paris Stock Exchange regained momentum, with an increase in the CAC 40 of 0.86% around 1:00 p.m. to 6,604 points.

Same observation when looking at the interest rates of sovereign bonds. Still around 1 p.m., French 10-year OAT rates rose very slightly (+1.06%) to 1.282%. The increase is therefore not spectacular. Admittedly, this rate is now at its highest since 2014. But its rise began last December (the rate was then hovering around 0%) and is above all to be attributed to the slippage of inflation almost everywhere in the countries developed countries and the accelerated tightening of the monetary policies of the major central banks. For the moment, therefore, a possible “Le Pen effect” seems very limited.

Reduction of the gap with Germany

It should be noted that the spread with Germany (in other words the difference observed between the French sovereign rate and that of the German Bund, which serves as a reference) even narrowed slightly and reached 49 basis points (or 0, 49 percentage point), against 53 basis points at the end of last week (as L’Agefi points out). Moreover, the rate of the German Bund rose sharply (virtually +10%) to reach 0.78%.

“The markets appear moderately relieved at the idea of ​​not having two candidates from radical political parties in the second round, but are not reassured at the idea of ​​having an undecided second round”, summarizes Guillaume Dejean, Senior macro & FX strategist for Western Union. “We are still quite far from a phase of massive relaxation on the European markets even if some short-term signals have pointed to a small” relief “”, analyzes for his part Alexandre Baradez, head of market analysis at IG France.

“We must not lose sight of the fact that the markets are judging the results of this first round in the short term, but that the world news remains dominated by the Ukrainian crisis with its repercussions on all the world markets, whether currencies, raw materials or even indices. Not to mention a still tense health situation in China, whose confinements again raise fears of an increase in logistical tensions and therefore shortages accompanied by inflationary tensions. French news, which is also clearly European news , will therefore continue to get involved in geopolitical, monetary and health issues in the next 15 days”, explains Alexandre Baradez.

“In Europe, and more particularly in France, the news remains political, the CAC 40 remains stable this morning at the end of the 1st round of presidential elections, despite the fact that the outgoing president has only a short lead against its rival of the National Rally. Marine Le Pen has never been so close to winning. Renowned anti-European and pro-Putin, her victory could generate a shock wave on the markets, comparable to that caused by the victory of the Brexit or Trump in 2016”, judge for his part Antoine Fraysse-Soulier, head of market analysis for eToro.

Defense and construction sectors outperform

On the foreign exchange side, another important element to look at as to a possible nervousness of the markets for the presidential election, the euro nibbles a few points against the dollar, with parity at 1.0905 around 1:15 p.m. “The euro could experience some (temporary) relief after Emmanuel Macron’s victory in the first round, however, it is the war in Ukraine that has recently changed the single currency”, anticipated John Plassard in his morning note, deputy investment director at Mirabaud.

As for the sectors to watch on Monday, the manager distinguishes according to the programs of the candidates the “pro-Macron” sectors which would benefit more from the reforms envisaged (namely the “financial, industrial, defense, building materials” sectors) and the “pro-Le Pen” sectors (“real estate, consumer goods, telecom operators”).

Looking at the evolution of values ​​on Monday, the finding is not clear. Admittedly, the leaders in real estate and building materials tend to do better than the market, for example: +3.23% for Vinci, +1.85% for Bouygues, +1.65% for Saint-Gobain or another +1.29% for Nexity (against +0.76% at the same time for the CAC 40). But conversely, those of distribution underperform: +0.69% for Carrefour and even -1.45% for Casino.

For its part, the defense sector is actually rather sought after on Monday: +3.29% for Thales, +5.96% for Dassault Aviation.

It will probably be necessary to wait a few days, for the polls of the second round to become clearer, to observe clearer movements. For the moment, the polls announce a much tighter match than in 2017, with Emmanuel Macron ahead of Marine Le Pen by a short head (52% against 48%, according to our Elabe poll for BFMTV and L’Express with our partner SFR). If the gap is reduced or even if Marine Le Pen reverses the trend, the markets could become more tense, even if the RN candidate has largely softened her program vis-à-vis the European Union, one of the points that most worried managers during the previous presidential election.

Jean-Louis Dell’Oro – ©2022 BFM Bourse

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