Relief at VVD victory in Dutch vote

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Centre-right People’s Party for Freedom and Democracy, or VVD, led by current Prime Minister Mark Rutte won the largest share of seats as the Netherlands went to the polls yesterday.

The long-awaited outcome buoyed investment markets as mainstream parties enjoyed a better-than-expected result, but volatility looms as the fates of France and Germany remain unknown.

The anti-Islam Freedom party, led by Geert Wilders, is seen to have been one of the relative losers of the election, according to Investec Wealth & Investment.

Head of fixed income Darren Ruane says European equity markets have risen by around 1 per cent in early trading, but he notes this coincided with the Federal Reserve interest rate decision last night.

He says: “Government bond yields in Europe are trading only marginally lower from overnight levels.

“Bond markets were forecasting a benign outcome from the Dutch elections, with a very strong gain for Wilder’s Freedom party required to disrupt markets in a meaningful way.”

As Rutte now works towards forming a coalition over the coming weeks, investors’ attention is turning to the forthcoming French elections next month.

Old Mutual European (ex UK) Smaller Companies fund manager Ian Ormiston says: “With yesterday’s election proving to be something of a non-event for financial markets, our attention now shifts to the French presidential and parliamentary elections next month.”

Neuberger Berman senior portfolio manager for European high yield strategies Andrew Wilmont says markets will be hoping that the first round of the French elections next month will be equally benign.

He adds: “Indeed, European government bonds and risky assets in Europe are likely to be a little choppy over the coming month.

“Currencies may also experience some volatility – at least in the short term.”