The final tally was Macron 23.75%, Le Pen 21.53% and to say markets are relieved would be an understatement.
One peculiar thing is that it seems completely lost on everyone that Marine Le Pen did indeed make the second round. So it’s not exactly like populism just fell flat in Sunday’s vote. Rather, the enthusiasm seems to stem from the fact that polling is “great again.” Apparently, Brexit and Trump didn’t completely antiquate the pollsters and their methods and if that holds, then Macron will become President. Here’s how one former FX trader put it earlier this morning:
The pollsters won the first round of the French presidential election. In other news, Emmanuel Macron and Marine Le Pen have advanced to the next phase. There were times last night when there seemed to be as much relief from the forecasts being accurate as the diminished likelihood that one of the extremists will win the ultimate prize.
Truer words have yet to be spoken about this election.
Ultimately, the second round will be a fight between nationalism and globalism and by all accounts, the globalists will easily carry the day.
As tipped here on Sunday evening, that’s being reflected across markets – and ‘bigly.’
Eurozone stocks are surging, especially the CAC 40 which is up more than 4%…
The euro is up sharply…
The yen is the loser as investors dump havens…
French yields are falling as investors dump safe-haven bunds…
Which means the OAT-bund spread has come in materially and swap spreads collapsed across the curve…
The EURUSD rally was supported by macro and leveraged names that were not sufficiently exposed to euro upside and have thus been fading the dip off the open, two traders in Europe said. “EUR also supported by unwinds of bearish option trades expiring shortly after the second round of French elections,” Bloomberg goes on to note. Meanwhile, “implied vols in euro pairs are sharply lower as risk reversals erase French election risk premium [but] profit taking and CTA selling are capping gains for the time being, other traders said a few hours ago. Yen losses were capped by geopolitical tension.
Across the vol space it’s just comical…
- The VStoxx Index sinks 29% as of 8:40am in London, joining a drop in global stock-volatility indexes, as the Euro Stoxx 50 rallies as much as 3.4% following the result of the first round of French elections.
- U.S. VIX drops 21%
- In Asia, VNKY falls 17%, VHSI down 11%
Here’s SocGen’s morning take:
There is a huge amount to be said in the weeks and months to come about the historic failure of the two establishment parties in France to make it through to the second round of the Presidential election, and indeed about what that means for upcoming Parliamentary elections too, but for now, the biggest takeaway from the first round result is that pollsters did a far better job of predicting the outcome in France than they did for the EU referendum in the UK or the US Presidential election. And it’ s worth noting that the first poll released after the first round vote ended, from iPsos, sees a 62-38 outcome in favour of M Macron in the second round. That’s what the FX market is going to trade off in the days ahead and indeed is already doing. The Euro is on its way (up) and risk assets and currencies are heaving a sigh of relief.
So yeah, same story.
Here’s a look across markets (the DAX hit a record intraday):
- FTSE 7248.50 133.95 1.88%
- DAX 12410.23 361.66 3.00%
- CAC 5286.14 226.94 4.49%
- IBEX 35 10715.60 338.60 3.26%
- Nikkei up 1.4% to 18,875.88
- Topix up 1% to 1,503.19
- Hang Seng Index up 0.4% to 24,139.48
- Shanghai Composite down 1.4% to 3,129.53
- Sensex up 1% to 29,646.34
- Australia S&P/ASX 200 up 0.3% to 5,871.78
- Kospi up 0.4% to 2,173.74
Here’s what’s on deck in the US today (amusingly, Kashkari is doing another Q&A):
- 8:30am: Chicago Fed Nat Activity Index, est. 0.5, prior 0.3
- 10:30am: Dallas Fed Manf. Activity, est. 17, prior 16.9
CENTRAL BANKS (All times ET):
- 11:30am: Fed’s Kashkari Speaks at UCLA in Los Angeles
- 3:15pm: Fed’s Kashkari Participates in Q&A at Claremont McKenna
Futs are tipping Wall Street +1% at the open.