Macron win stabilizes euro and boosts key French stocks


Emmanuel Macron’s victory in the French presidential election should come as a relief to investors who fear a Marine Le Pen win would roil European markets. The euro, French bonds and national bank stocks are among the assets that should benefit from Macron’s victory for a second term, according to asset managers. The euro was up as much as 0.6% against the dollar in early Asian trade before paring its rise to about 0.2% as of 7:48 am in Hong Kong. The risk of a victory for far-right nationalist and Eurosceptic Le Pen had kept investors on their toes, with some predicting that European assets could suffer a sell-off akin to the euro crisis or Brexit. “European investors are celebrating after the French exit polls: a possible Black Monday is definitely averted,” said Fabio Caldato, Partner at Olympia Wealth Management. According to the French Interior Ministry website, Macron received 58.55% of the vote in Sunday’s runoff, compared to 41.45% for Le Pen. The nationalist leader conceded defeat in a speech to her supporters in Paris. “In the short term, the logical main beneficiary of this choice could be the euro,” said Frederic Leroux, a member of Carmignac Gestion’s strategic investment committee. Stocks of French banks like BNP Paribas SA and Societe Generale SA, which have benefited from closer EU integration, should react positively to Macron’s re-election. The 44-year-old president pledged to continue efforts to make France a cornerstone of a stronger, more integrated EU. Shares in toll road operators Vinci SA and Eiffage SA should also benefit as Le Pen’s pledged to nationalize the country’s motorways. Investors also say Macron’s win is positive for Electricite de France SA and Engie SA, as well as other stocks heavily dependent on the French market, such as construction company Bouygues SA. French stocks and bonds have already been supported by polls that have shown a widening gap between the two rivals since the first round. Markets took solace as politicians left and right backed Macron and Le Pen failed to make a big hit in Wednesday’s debate. Macron’s re-election doesn’t come as a huge surprise to markets, but it should come as a relief nonetheless, said Emmanuel Cau, head of European equity strategy at Barclays. He sees room for a “modest recovery rally” with the euro, France’s benchmark index CAC 40 and French bank stocks benefiting the most. While Le Pen had backtracked on calls to abandon the euro back in 2017, she nonetheless called for a referendum on the constitution to favor French law over EU rules. She wanted to restore permanent border controls in the Schengen area, which would have been unlawful in the bloc. “Macron’s victory takes a major risk off the table at the European Union level,” which is positive given the array of other challenges markets are currently facing, including Chinese Covid-19 lockdowns, geopolitical risks and higher inflation, said Alexandre Baradez, chief market analyst at IG France. He said the CAC 40 index could rise about 1% on Monday barring any bad news during the Asian trading session. A stock trader’s guide to the French election: winners and losers The challenge for Macron over the next five years will be to gain support for his plans to make the country more competitive by reforming social policies such as pensions and economic ones Fundamentals of the country improved. Investors are already turning their attention to the general elections in June. Macron’s margin on victory was much narrower than last time he beat Le Pen by more than 30 points, and the growing support for their nationalist program reflects a bitterly divided country. Although “political risk in France will not completely disappear, at least that hurdle has been cleared,” said Michael Metcalfe, global head of macro strategy at State Street Global Markets. This keeps markets “focused on the ECB and the implications of the ongoing conflict in Ukraine.” (Blumberg) Macron win stabilizes euro and boosts key French stocks

Fry Electronics Team

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