French elections: markets switch on risk

Global stocks rallied, the euro hit a five-month high and French government bonds rose after the pro-euro and centrist candidate Emmanuel Macron came first in round one of the French presidential vote in an outcome that lessens the risk of a Brexit-type shock on financial markets. Polls suggest Macron is likely to beat his far-right counterpart Marine Le Pen on May 7 by more than a 20 percentage point margin. Yet with France’s political establishment having been marginalised, what can investors expect to unfold in Europe’s second largest economy? 

Even if Macron wins the race to the Élysée Palace, it would be premature to suggest that populism has been dealt a mortal blow in Europe. After all, the far-right Marine Le Pen and hard-left anti-euro Jean-Luc Mélenchon together received more than 40 per cent of the vote in Sunday’s ballot. At this point, it is not clear what proportion of those votes will go to Le Pen in the second round run-off.