© Reuters. A TV screen shows the face of French President Emmanuel Macron, candidate for his re-election, after early results in the second round of the 2022 French presidential election are published, in Paris, France, April 24, 2022. REUTERS/Piroschka Van De Wouw
By Saikat Chatterjee
LONDON (Reuters) – Following is market reaction to French President Emmanuel Macron’s victory over rival Marine Le Pen by a comfortable margin, according to exit polls, in Sunday’s election.
Market reaction:
Eurozone bond yields, particularly yields on French government debt are likely to dip on Monday as markets are relieved at Macron’s win. Yields on benchmark 10-year debt which hit more than seven-year highs last week may dip by 5-7 bps in European trading on Monday.
A widely watched spread between French and German government, a gauge for French political risks, is likely to tighten. It hit an April 2020 high of 54 bps earlier this month.
The euro is likely to strengthen. It closed Friday at $1.08095, not far from a two-year low of $1.0758 on April. 14
Here is a summary of analyst comments:
KENNETH BROUX, CURRENCY STRATEGIST, SOCIETE GENERALE, LONDON:
“The markets should be relieved on the Macron win. We should see a modest tightening in French and German bond yield spreads. French stocks should open marginally higher but the euro will be buffeted by the surge in dollar rates last week. The big news from Europe in the coming days is the growing likelihood of a Russian oil embargo.”
HOLGER SCHMIEDING, CHIEF ECONOMIST, BERENBERG, LONDON:
“Based on the exit polls we can’t say how big his (Macron’s) margin will be, but the polls suggest a convincing win and that gives him momentum for the parliamentary elections.
“He has a chance of winning those elections and getting close to a majority, so he should be able to install a government that is friendly even it has to rely on support.
“For markets, this is probably only a modest sigh of relief as the latest opinion polls had already suggested a win for Macron. But what we can say is that we have been spared the nightmare scenario.”
KASPAR HENSE, SENIOR PORTFOLIO MANAGER, BLUEBAY ASSET MANAGEMENT, LONDON:
“We had thought the markets were a bit complacent going into the elections and we had gone short on Italian debt as a result. While over the medium term there will be some pressure on peripheral bonds, the immediate market reaction will be one of relief on the Macron news.
“We could see OAT bond yields move 10 bps tighter and German bund-swaps spreads also narrow 5 bps. The euro should move a bit higher but in the medium term as the short term risk implication has ebbed. Macron now has some more time to put together more EU reforms namely on energy and more cohesiveness on key sectors such as energy and defence.”
MARCHEL ALEXANDROVICH, EUROPEAN ECONOMIST, SALTMARSH ECONOMICS, LONDON:
“What we have learned form the last couple of years is that the polls are good but not completely reliable. So, we are likely…