'Macron rally' pushes shares to record high

Experts divided on how sustainable the boost to market sentiment will prove to be

Emmanuel Macron
Emmanuel Macron greets supporters
(Image credit: Getty Images)

A market rally that set in following the victory for Emmanuel Macron in the first round of the French presidential election on Sunday is rolling on.

The Guardian says the MSCI All World index, a main global stocks benchmark, hit an all-time high for the second consecutive trading session, taking it above 1,871.

In Europe the euro hit a five-month high on Sunday and was heading back to that level this morning, taking it to £0.85 against the pound.

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Elsewhere on European stock markets, the French Cac-40 hit a nine-year high after rising four per cent - and this morning it was edging higher again on 5,274. In Germany the Dax rose above 12,500 for the first time ever.

Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management, told the BBC the upward move was "a classic relief rally".

In short, markets were worried that the first round election might result in a run-off between the far-right Marine Le Pen and hard-left Jean-Luc Melenchon, both of whom are staunchly protectionist and anti-EU.

Instead the pro-EU centrist Emmanuel Macron won the vote - and while Le Pen did progress, Macron is widely expected to win the second round handsomely.

For some experts this, combined with the recent victory for liberal parties in the Dutch election, shows that the rise of the far right - and the consequent threat to the EU project - is fading.

"It’s clear to me that the political risk within European democracies is now off the table, and, given their cheaper valuations [vs US stocks], that’s a good reason to buy European stocks again," says Howard Gold on Market Watch.

But for Matthew Lynn of the Daily Telegraph, investors are vastly overstating the importance of Macron's victory.

He cites the fact that his party, En Marche!, currently has no parliamentary candidates and so he is unlikely to win a majority to help him achieve his ambitious economic reforms.

He is also, says Lynn, likely to be thwarted in any attempt to formalise a budget and fiscal policy for the single currency - and will be prevented from creating demand in France through monetary expansion by the fact of the monetary union itself.

"It is always positive to avert Armageddon. Even so, Macron is likely to prove a disappointment," suggests Lynn.

"As that becomes clear over the summer, the [market] enthusiasm will evaporate very quickly."

Euro surges on win for 'France's Obama' in presidential poll

24 April

Independent presidential candidate Emmanuel Macron's victory in the first round of the French presidential election has given a boost to both the euro and French stocks.

At the time of writing, the euro had gained two per cent against the Japanese yen - "which investors tend to flock to when they perceive high levels of risk, says the BBC - and 1.2 per cent against both the dollar and the pound.

The single currency hit its highest level since 10 November, immediately after the US presidential election.

France's major share index, the Cac 40, was four per cent up in early trading this morning.

This investor enthusiasm reflects not only that the centrist Macron won the first round poll, but widespread confidence that he will emerge victorious against the far-right candidate Marine Le Pen in the run-off vote.

"Investors expect that Mr Macron will come out clearly ahead of Ms Le Pen in the second-round vote," says the Financial Times. "A snap poll from Ipsos on Sunday showed 62 per cent support for Mr Macron and 38 per cent for Ms Le Pen."

Why is a Macron victory so reassuring, even though in common with Le Pen he is an outsider not standing for one of the two main parties?

"Firstly, Macron is a politically stable, centrist candidate, almost like France's Obama… he is considered a safe pair of hands," responds Kathleen Brooks, research director at City Index.

"Secondly, it helps to solidify the future of the EU and the euro, something that Marine Le Pen wants to destroy."

Octavio Marenzi, chief executive of the financial research consultancy Opimas in Paris, added: "Macron will be reassuring to markets, with his pledge to lower corporate taxes and to lighten the administrative burden on firms.

"He basically represents continuity."

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