French voters back Macron and Le Pen
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French voters back Macron and Le Pen

Centrist Emmanuel Macron and Front National Marine le Pen move to the second round of the French presidential election.

French citizens voted in the first round of the presidential election yesterday. Early estimates based on a partial vote count put centrist candidate Emmanuel Macron at 23.8 percent followed by Front National Marine Le Pen at 21.7 percent, qualifying both for the 7 May runoff vote. However, the contest was a close call, with the two other main candidates, Republican François Fillon and far-left Jean-Luc Mélenchon, garnering 19.7 percent and 19.2 percent, respectively. Socialist Benoît Hamon was backed by 6.4 percent of the electorate.

For the first time in decades, the two mainstream parties, Les Républicains and the French Socialist Party, will be absent from the second round of the presidential race. Despite fears that broad disillusionment with politics would keep voters at home, the estimated turnout was just below 80.0 percent, down from five years ago but higher than estimates released before the vote.

Macron in good position for the second round

Mr. Macron is now expected to win the second round of the French presidential election against the right-wing Front National leader. Most pollsters, whose predictions before the first round match the announced results, currently give Mr. Macron a 20-point lead in the runoff. Shortly after the results were announced last night, defeated mainstream candidates started to call on their supporters to vote for him. Nonetheless, uncertainty over his ability to muster support ahead of the June parliamentary elections will prevail, given that his En Marche! party is only one year old.

Markets are likely to react positively to the news, with the risk of an adverse presidency for the French economy and European integration now markedly lower. The CS Investment Committee continues to prefer European equities backed by the cheap valuation and positive growth momentum. European banking stocks should also benefit in the next few days, and we continue to prefer them to their US counterparts.

In Foreign Exchange markets, the euro is likely to see a short-term relief bounce, but the fundamental long-term divergence between the monetary policies of the US Federal Reserve and the European Central Bank (ECB) should continue to support our underperform on Euro view against the US-Dollar. Focus this week should center on the ECB monetary policy meeting on Thursday, when President Mario Draghi is expected to leave monetary policy support unchanged.