In breaking news, French stocks and the euro surged on Monday following the results of the first round of elections, which indicated a significant defeat for President Emmanuel Macron by the far right. However, the far-right party fell short of winning an outright majority in parliament.
The CAC 40 index, representing the 40 largest companies listed in Paris, spiked 2.7% at the open, demonstrating a positive reaction from investors.
Moreover, the euro, which had experienced a decline after Macron announced the snap election on June 9, reached its highest level against the dollar in over two weeks.
Yields on French government bonds remained stable despite recent widening compared to German equivalents, signaling stability in the bond market. The risk premium over German government debt hit its highest level since the eurozone crisis over a decade ago.
Following a high voter turnout on Sunday, Marine Le Pen’s far-right National Rally party secured the lead in the first round with 33.15% of the vote. The left-wing New Popular Front coalition came in second with 27.99%, while Macron’s Ensemble alliance landed in third place with 20.76%, according to official results released by France’s Interior Ministry.
Market experts like Mohit Kumar, Jefferies chief economist for Europe, expressed that the outcome was better than feared by markets but not as favorable as the pre-election status three weeks ago. Kumar described the initial response as a “relief rally.”
Investors had been concerned that a far-right or far-left parliament would lead to increased government spending, exacerbating France’s already high debt and budget deficit. France’s government debt currently stands at 110.6% of GDP, with a budget deficit of 5.5% of GDP, among the highest in the EU.
While Sunday’s election results may have alleviated fears of extreme fiscal policies, there are still worries that a divided parliament may struggle to address the country’s debt issues. Analysts like Kumar suggest that France could face political paralysis and a stalled reform process in the coming years.
This is a developing story, and updates will be provided as more information becomes available.
