Euro jumps, shares firm on French election relief

SYDNEY— The euro briefly vaulted to five-month peaks yesterday after the market’s favored candidate won through the first round of the French election, reducing the risk of a Brexit-like shock and sparking a mass unwinding of safehaven trades.

Spreadbetters pointed to opening gains across European bourses, with the French market alone seen up around 2 percent.

Japan’s Nikkei jumped 1.5 percent as the yen retreated, while MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.3 percent.

Shanghai shares, however, fell 1.7 percent after state media signaled that Beijing would tolerate more market volatility as regulators clamped down on riskier financing.

In France, centrist Emmanuel Macron took a big step toward the presidency on Sunday by winning the first round of voting and qualifying for the May 7 runoff alongside farright leader Marine Le Pen.

The outcome lessens the risk of an antiestablishment shock on the scale of Britain’s vote to quit the European Union with Macron widely tipped to win the final vote and keep France in the union.

Opinion polls put Macron ahead by over 20 points, a lead so large that a repeat of the Brexit surprise that spread turmoil in financial markets seemed highly unlikely.

Investors had feared for the single currency’s future if one of the far-left candidates had gotten through to fight Le Pen.

The euro jumped in relief, and was last up 1.3 percent at $1.0866, having been as far as $1.0940, the highest since early November.

The safe-haven yen slipped across the board with the euro surging 2.4 percent to 119.77 yen, while the US dollar gained 1 percent to 110.20 yen. Likewise, gold fell 0.8 percent to $1,273.40 an ounce.

“The rise of the euro and risk appetite rebounding is understandable and this should also see yields in Europe fall, spreads to Bunds tighten and stocks rally,” said Tim Riddell, an analyst at Westpac.

“However, such gains are likely to be contained when markets reflect upon the marked shift away from the ‘establishment’ and just how effective the new president may be,” he added.

Wall Street on Friday had only a modest lift from news that President Donald Trump would announce the broad outline of his proposed tax package on Wednesday.

“Markets are skeptical that the real details will be forthcoming,” said analysts at ANZ in a note.

There is also plenty of conjecture about whether any tax cuts will be able to be revenueneutral, and that could affect their ease of passage through. The Dow ended Friday down a minor 0.15 percent, while the S&P 500 lost 0.30 percent and the Nasdaq fell 0.11 percent.

Investors were also keeping a wary eye on tensions in the Korean peninsula.

North Korea said on Sunday it was ready to sink a US aircraft carrier to demonstrate its military might, in the latest sign of rising tension as Trump called the leaders of China and Japan to discuss the situation.

Seoul responded by asking Washington about holding joint drills with the USS Carl Vinson aircraft carrier strike group as it approaches waters off the Korean peninsula.

Oil prices recouped just a little of last week’s hefty losses, still weighed by signs US production and inventory growth were offsetting OPEC’s attempts to reduce the global crude glut.