The result of the first round of voting in the French Presidential election has had a big impact on markets with the risk positive Emmanuel Macron emerging as the clear front runner. This continues a period where politics are extremely important in trading and financial markets. We look at the impact that Macron’s performance has had on the analysis of major forex, equities and commodities markets and what to look for as the dust begins to settle.
Politics continues to have a significant impact across major markets. As Donald Trump has struggled to achieve much on domestic soil in the first few months of his Presidency, markets have started to question the bullish argument of the reflation trade. With Congress so hugely divided it is difficult to see him getting anything of any significance through the legislature. Subsequently a reversal in the outlook on Treasuries and equities is forming as the yield curve flattens and equities corrects.
Over in Europe, a surprise election announcement in the UK has driven sterling higher and the FTSE 100 lower. Perception is that a stronger and stable mandate for Theresa May will bode well going into the negotiations with the EU. Nobody knows the exact intentions of Theresa May over Brexit but could her commitment to keeping the 0.7% of GNP for foreign aid be a sign of standing up to the hard Tory right? This could suggest he intention to use an increased mandate as a tool to negotiate for a softer Brexit. Sterling is certainly a key indicator for how the market will continue to view this.
Finally we have seen Emmanuel Macron and Marine Le Pen moving through to the second round in the French Presidential Election. The performance of Macron in the vote has simply solidified his position as favourite for the second round and this is a risk positive result which has driven French yields lower, but also strengthened the euro and Eurozone equities.