Investors cheer Macron, but worry about parliament backing

French presidential election candidate for the 'En Marche!' (Onwards!) political movement, Emmanuel Macron celebrates after the first round of the French presidential elections in Paris, France, 23 April 2017. [Yoan Valat / EPA]

Financial investors say they trust centrist Emmanuel Macron to bring much-needed economic reform to France if he wins a presidential election runoff.

But they warn it remains unclear whether a man who founded his party only a year ago to shake up the political landscape can easily secure a majority in a parliamentary election which will follow in June.

Market watchers see Macron as best-placed to deliver cheer in a country battling political malaise and widespread unemployment after booking a runoff against National Front leader Marine Le Pen.

Macron would beat Le Pen by 64% to 36% of votes in the second round, according to a poll by Elabe carried out via the Internet on April 24.

“The results from the first round of vote counting strengthen our confidence that, from this summer, France will have a president in favour of reforms for the first time,” said Stefan Kreuzkamp, Chief Investment Officer with Deutsche Asset Management.

With stocks across Europe rising strongly Monday – the main Paris index soared 4% after the first round results – Blackrock, the world’s largest asset manager, was upbeat.

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“We see this as a positive surprise for risk assets in the near term. Business-friendly and pro-European Macron, who has maintained a large winning margin in head-to-head polls with Le Pen, can now build on his momentum,” Blackrock’s analysts said.

Macron, a former investment banker who had never before stood for election, edged out Le Pen, who many polls had earlier suggested might win the first round contest.

Their respective scores of 23.8 and 21.5% eliminated traditional centre-right candidate François Fillon and leftist rivals Jean-Luc Mélenchon as well as Benoît Hamon of outgoing President François Hollande’s Socialist Party.

Polls suggest Macron will easily defeat Le Pen in the final round but thereafter he will have to court traditional parties to build a workable presidential majority in the National Assembly, where the Socialists and the centre-right Republicans of Fillon and former president Nicolas Sarkozy have long held sway.

Even so, the markets were buzzing after Macron’s showing on Sunday.

“It’s a very good day. Some of our clients turned in very strong performances between the close of the CAC 40 index Friday evening and this morning’s opening,” Elie Bohbot, commercial director at Saxo Bank, told AFP as market screens portrayed bullish early data to cheer traders still bleary-eyed from monitoring the poll outcome into the small hours.

Some warn that a Le Pen victory cannot be ruled out completely in a runoff pitting against one another two candidates diametrically opposed on issues ranging from fiscal policy to Europe.

Le Pen’s desire to see France shelve the euro and offer a referendum on leaving the European Union constitutes a “nightmare scenario,” the high finance world has repeatedly warned.

But such an outcome is now very unlikely, analysts agreed.

Historic French election upheaval sets up second round clash over EU

The first round of France’s presidential election on Sunday (23 April) saw the traditional parties reduced to insignificance in a vote that exposed the country’s deep social divisions. EURACTIV France reports.

‘Vive la France’

“Vive la France, long live Europe,” exulted Deutsche’s Kreuzkamp.

One French banker said on condition of anonymity that Macron’s pro-business, pro-investment and pro-European stance offer a “favourable signal to foreign investors”.

He added Macron would steer a line somewhere between defeated Fillon’s “slightly Thatcherite” credo and a “more Kenyesian” approach nearer to Hamon for a hybrid approach between left and right “susceptible to win greater acceptance among the French”.

Macron has won admirers in the financial world with criticism of stringent regulations imposed on the sector in response to the banks’ role in sparking the 2008 financial crisis.

But implementation of Macron’s programme – which Saxo Bank analyst Andrea Tueni said investors view as “seductive and balanced” – could run into roadblocks if parliament refuses to play along.

Leon Cornelissen, chief economist with Robeco, believes Macron will have to cast a centrist, catch-all net wide and “will probably have to form a coalition,” which could cause market waves if it dilutes his programme too much.

For Bank of America Merrill Lynch, “expectations of far-reaching, quick supply-side reforms in France probably have to be shelved” now that Fillon has been eliminated.

“Emmanuel Macron advocates a moderate reformist path, which we would summarise as social-democratic.”

Moscovici: French election ‘a referendum on Europe’

The French presidential election run-off will offer a clear-cut choice between two radically opposed visions of France and Europe, said EU Commissioner for Economic and Financial Affairs Pierre Moscovici, in an unusual departure from the reserve imposed on EU officials.


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