The FTSE 100 climbed 1.8 per cent to 7,243.81 in early trading – following European stocks’ gains – on expectations centrist candidate Emmanuel Macron will win the second round of the French Election on 7 May.
Yesterday saw a victory for Macron and far-right nationalist Marine Le Pen in what has been called an unprecedented first round. With 97.43 per cent of votes counted, Macron has 23.86 per cent to Le Pen’s 21.43 per cent. Opinion polls are now forecasting a victory for Macron following the endorsement from two of the losing candidates; republican Fillon and socialist Hamon.
“The wide-enough margin allows markets to conclude that concerns Macron may not have the ability to translate support into effective votes may disappear,” Morgan Stanley says.
“Before the election it was feared the supporters of extremist candidates would show a higher commitment to vote compared to mainstream candidates. The moderate overall participation rate, and, even more important, the fact that Macron has come out first within the first round of the Presidential race, suggest that markets may reduce political-related risk premiums.”
Monica Defend, head of global asset allocation research at Pioneer Investments, says there is likely to be a relief rally in European equities.
“We expect this electoral outcome to be well received by the market – bringing a relief rally in European equities and spread tightening across European peripheral bonds,” Defend says.
“We remain constructive on risk assets, especially equity, based on a benign growth and inflation outlook. Overall, we favour Europe and Japan, reflecting the improvements in the macroeconomic backdrop and relatively attractive valuations.”