The outcome of the first round of the French election leaves a strong probability of a market-friendly scenario emerging in the final polls – though Marine Le Pen could pick up last minute support from the left wing.
The pro-EU Emmanuel Macron, leader of the centrist En Marche party, and the right-wing National Front leader, Le Pen, triumphed in the first-round at the weekend, meaning the finals will be contested by non-mainstream parties for the first time in 60 years.
Monica Defend, head of global asset allocation research at Pioneer Investments, said: “Macron has a track record as a reformer and is a European enthusiast so this first round result is likely to be market friendly.”
She noted opinion polls were forecasting a significant victory for Macron in the run-off as he had already received an endorsement from two of the losing candidates, while a third candidate said neither party would be endorsed.
That third candidate is Jean-Luc Melenchon, a “far-left firebrand who enjoyed a last-minute surge in popularity”, said David Zahn, head of European fixed income at Franklin Templeton.
So far, it looks as if Melenchon’s supporters are backing Macron, said Zahn. Melenchon himself has said he will not endorse either of the frontrunners. Two other defeated candidates – Francois Fillon and Benoit Hamon – have pledged their support to Macron.
But Zahn added that Melenchon shared a number of political ambitions with Le Pen despite being at opposite ends of the political spectrum. These included an anti-European Union bias, loosening fiscal rules, growing the size of the state, and increasing taxes.
“So there is a chance that Melenchon’s erstwhile supporters could side with Le Pen. Equally they may drop out of the process and not vote in the second round, meaning a lower turnout,” said Zahn.
Defend believes, based on polls that have largely been accurate so far, that left wing and left-of-centre voters would largely choose Macron in the run-off, with only an element of centre-right voters adding to Le Pen’s support.
Despite some residue uncertainty after the weekend first-round election, there is a widespread sense of relief about the result from an investment point of view.
Pascale Auclair, global head of investments at La Française Asset Management, said: “The French electorate has spoken. The result of the first round of the French presidential election has reduced the risk of a French exit from the Eurozone. Expectations for the endorsements of the eliminated candidates create a real sense of market optimism leading up to the second round of the election on Sunday, May 7th.”
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