Markets set for relief rally after Macron win
LONDON: The euro topped US$1.10 for the first time in six months in early Asian trading yesterday, and riskier assets were expected to rally when other markets open, on relief that Emmanuel Macron had comfortably won the French presidential election.
Pollsters’ projections gave the market-friendly, pro-Europe Macron a winning margin of around 65 per cent, easily defeating the farright Marine Le Pen, a nationalist who had threatened to take France out of the European Union.
The centrist’s emphatic victory brought comfort to investors and European allies alike, who had been nervous of the risk of another populist upheaval to follow Britain’s vote to quit the EU and Donald Trump’s election as US president – neither of which had been predicted by pollsters or bookmakers.
Opinion polls, bookies and prediction markets were proved right this time.
But analysts and economists said their failure to accurately predict last year’s events had meant
Emmanuel Macron’s victory gives markets a much deserved breather from European politics.
Bill Street, head of investments for EMEA
there had nevertheless been a risk premium priced into French bond yields, the euro and French stocks, and a modest rally would therefore be likely to follow.
Europe’s common currency rose about 0.2 per cent in early Asian trade to hit US$1.1023, its highest since Nov 9.
“Emmanuel Macron’s victory gives markets a much deserved breather from European politics,” said Bill Street, head of investments for EMEA at State Street Global Advisors in London.
“This result, combined with last week’s preliminary Greek debt agreement, will be enough to support a short-term relief rally. Looking forward, Macron only offers upside surprises.”
The euro’s rise was only slight compared with its 2 per cent surge on the back of the first-round results on April 23, when polls had been much tighter, and there had been worries that French voters would be left with a choice between two eurosceptic, radical candidates.
Street, and other investors, said markets’ focus would now move away from European political risks and towards monetary policy, with the European Central Bank expected to begin scaling back its expansive asset-purchase programme in the coming months as inflation and growth pick up across the euro zone.
The spread between French 10-year government bond yields and their German equivalent – a key barometer of risk sentiment around the French election over the past few months, which had already narrowed after the first round – was widely expected to fall further.