Financial markets have exhaled breath – they have decided that Emmanuel Macron’s first-round victory in the French general election means the pro-European Union vote is holding.
The centre is not coming apart despite Brexit and Trump’s victory stateside. It comes after the Dutch rejected the nationalist far-right and the likelihood that a centre-right or centre-left party will win the German elections in September.
Markets are now pricing in a Macron victory in the decisive second round on 7 May
The French stock market shot up more than 4 per cent to its highest level in two years yesterday on the election result; the euro was trading at between 1 and 2 per cent up against the dollar. In London, the FTSE 100 index closed up 2.1 per cent or about 150 points at 7,264.68.
In sum, the markets are now pricing in a Macron victory in the decisive second electoral round on 7 May. The fly in the ointment of this cathartic market response is that the business end of the French general election will take place against a transmogrified electoral landscape.
Macron’s En Marche! party will take on far-right firebrand Marie Le Pen in the run-off. For the first time since the Fifth Republic was formed in the late 1950s neither of the two mainstream parties of the left and right – the hapless Socialists and the scandal-tainted Republicans – have a runner in the race. In more normal times, this would rattle markets.
Transferred to our admittedly non-presidential political model this side of the Channel, it would be as if a UK election was being held between a popular youthful unknown quantity and the latest head of Ukip. Meanwhile, established French political blocs are in the wasteland.
It shows how unnerved markets are about unleashed populism that the seismic political disruption we are seeing in France is regarded as the lesser of two evils. Macron espouses moderate French business reforms – good luck with that – along with a Nordic welfare model. Those are interesting bedmates, but the credo has sepia tones of Tony Blair’s Third Way which more widely had seemed to have been overtaken by the wilder populist political winds.
No matter. Investors have decided that France, having avoided apocalypse (a Le Pen victory and the country’s exit from the euro and possible exit from the EU), merits a frisson of relief without actually breaking open the Bollinger.