LONDON (Reuters) – Here are the market reactions to Emmanuel Macron’s victory over Marine Le Pen in the second round of France’s presidential election on Sunday:
Eurozone bond yields, particularly those linked to France’s public debt, are expected to fall on Monday as markets are relieved by Emmanuel Macron’s victory.
The yield on the benchmark 10-year bond, which hit a more than seven-year high last week, could plunge 5 to 7 basis points in European trading on Monday.
It is expected that the yield gap – or “spread” – between French and German securities, which is an indicator of French political risk, will narrow. Earlier this month, he matched his April 2020 record at 54 basis points.
The euro is expected to strengthen, after finishing Friday at $1.08095, not far from its lowest level in two years, of $1.0758, recorded on April 14.
* HOLGER SCHMIEDING, CHIEF ECONOMIST OF BERENBERG, IN LONDON
“Based on the exit polls, the size of (Macron’s) margin cannot be said, but these suggest a convincing victory that will put him on a path to legislative elections.
He has the opportunity to win these elections and approach a majority. He should therefore be able to install an allied government even if he has to rely on support.
For the markets, this is probably a slight sigh of relief, as the latest polls (before the election) had already suggested a victory for Macron. But we can say that we avoided the nightmare scenario.”
* KASPAR HENSE, SENIOR PORTFOLIO MANAGER AT BLUEBAY ASSET MANAGEMENT, LONDON
“We found the markets a little complacent ahead of the election… If in the medium term there will be some pressure on peripheral bonds, the immediate market reaction to Macron will be a relief.
We could see the yields of good OATs strengthening by 10 basis points and the spread tightening by 5 basis points. The euro should rise slightly but the risk in the medium term, as well as in the short term, has diminished.
Macron now has more time to put in place additional EU reforms, notably on energy, and more cohesion in key sectors such as energy and defence.
* SEEMA SHAH, CHIEF STRATEGIST OF PRINCIPLE GLOBAL INVESTORS, IN LONDON
“There will be a bit of relief (…) For the French markets, we could see a small rebound. But after the hot reaction, attention will turn to the European Central Bank and the outlook for rates of interest, which will be the main catalyst for European stocks and bonds.”
MARLENE LARUELLE, DIRECTOR OF THE INSTITUTE FOR EUROPEAN, RUSSIAN AND EURASIAN STUDIES AT GEORGE WASHINGTON UNIVERSITY, WASHINGTON
“Macron’s victory is good news for Europe, as he is a strong advocate of European unity, of the need for a unified EU foreign and defense policy, and plays a key role in Europe’s diplomacy in the current war in Ukraine.
An election of Le Pen would have created a clash with the EU and triggered a political crisis in France, and potentially in Europe, where (Le Pen) would have had few supporters except (Hungarian Prime Minister) Viktor Orban” .
However, Macron’s victory must be taken with a grain of salt: Le Pen achieves his best score and the level of abstention among young people is over 40%, so distrust of Macron’s governance is high “.
FREDERIC LEROUX, MEMBER OF THE CARMIGNAC INVESTMENT TEAM
“Macron’s victory should reassure the markets that the European dynamic will continue. In the medium term, the main logical beneficiary of this re-election could be the euro, which was still flirting on Friday at a two-year low against the dollar.
There is not necessarily any reason to expect a massive outperformance of French or European equities against American ones, as the European market has rather outperformed the American market in recent days.
The negative aspect, for the markets, of this rather comfortable victory could however come from a quick decision in favor of an embargo on Russian oil, which would come to exacerbate inflationary pressures and the economic slowdown in Europe.
(Report Dhara Ranasinghe and Saikat Chatterjee; French version Jean Terzian, edited by Jean-Michel Bélot)
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