European Stocks Rally With CAC 40 After French Election Result

What Markets Should Conclude From France's Election

France led gains in European equities as investors bet that pro-growth centrist candidate Emmanuel Macron will win the country’s presidential election after he made it through to the second round.

Boosted by gains in banks, the CAC 40 Index surged 4.1 percent at the close in Paris, the biggest advance since August 2015. Germany’s DAX Index rallied to 3.4 percent a record. The Euro Stoxx 50 Index jumped 4 percent, while the broader Stoxx Europe 600 Index rose 2.1 percent, both closing at their highest levels since August 2015.

Traders are pricing in “a Macron win in France vote,” Michael Hewson, an analyst at CMC Markets in London, wrote in a note. “The biggest gainers have been banking stocks, with French banks leading the charge higher.”

  • All major western-European equity benchmarks rose after Sunday’s vote, which put Macron in the May 7 runoff with far-right nationalist Marine Le Pen. A snap poll released late Sunday suggested Macron would defeat Le Pen by more than 20 percentage points in the second round.
  • Lenders were the biggest winners among Stoxx 600 groups. The Euro Stoxx Banks Index surged 7.4 percent, the best rally since 2012.
  • The VStoxx Index of euro-area volatility slumped 35 percent, the most on record.
  • The CAC 40’s advance on Monday marks the only time it has risen after the first round of the presidential election. 
  • It could outperform Germany’s DAX Index by 3 percent to 4 percent within a few days, Natixis strategist Sylvian Goyon said by phone. The French benchmark had advanced less than the DAX in the year through Friday’s close, before Monday’s outperformance.
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