The first round of France’s presidential election triggered a relief rally in global equities, as investors rallied behind pro-European Union (EU) centrist Emmanuel Macron. For investors, a vote for Macron is a vote for stability in an election race that featured several Eurosceptic candidates.
The independent Macron secured 24% of the ballot to finish first in the April 23 election. Far-right candidate and former head of the National Front Marine Le Pen finished second with 21.3% of the vote. Republican Francois Fillon came in at 20%, while Communist-backed Jean-Luc Melenchon won 19.6% of the vote.
In addition to Le Pen, Fillon and Melenchon each backed Eurosceptic positions in their political campaign. Macron’s ascendancy assures that the second round of voting will not feature two Eurosceptic candidates.
Under the French election system, a candidate must secure a majority to win the presidency. A second-round runoff election is scheduled two weeks later should no candidate secure more than 50% of the vote in round one. Round two ballots open on May 8.
The market’s response to the election result was nothing short of euphoric. France’s CAC 40 Index surged 4.1% the day after the Sunday election to close at its highest level in 14 years. The pan-European Stoxx 600 Index also climbed to 20-month highs.
Optimism quickly spread to Wall Street, where the S&P 500 Index spiked 1.1% and the Dow Jones Industrial Average added more than 200 points. Gains in the major equity indices would continue the following day.
The currency markets also lit up following the election result, with the euro climbing to the highest level of the year. The EUR/USD exchange rate settled at 1.0928 on April 26, the highest since early November.
Clearly, investors are banking on a swift victory for Macron in the upcoming runoff election. Latest polls show the market-friendly candidate holds a 22-percentage point lead over Le Pen. If the election were today, he would secure 61% of the popular vote.
Investors can expect another sharp rally in global equities should Macron secure the presidency on Sunday. Unlike Le Pen, who wants to abandon the euro and leave the EU, Macron has made the pan-European project the centre of his campaign. His success in the Sunday election would mean business as usual for the financial markets, which are already on high alert ahead of Brexit negotiations.
Marine Le Pen recently stepped down as leader of the National Front in an attempt to broaden her appeal. Her far-right platform has made huge inroads this election cycle, which is expected to strengthen her mandate in future elections.
 Investing.com (April 24, 2017). “France stocks higher at close of trade; CAC 50 up 4.14%.”
 The Irish Times (May 1, 2017). “French election poll: Macron leads Le Pen by 61% to 39%.”