EUROPE MARKETS: French Stocks End At 2-year High After Vote Eases 'Frexit' Fears
CAC 40 scores biggest percentage gain in 5 years
French stocks finished sharply higher on Monday after centrist Emmanuel Macron's strong showing in the first round of voting in the France's presidential election, neutralizing fears that two anti-European Union candidates would make the final runoff.
The CAC 40 index climbed 4.1% to end at 5,268.85, nabbing its biggest one-day percentage gain since August 2012.
The French benchmark also achieved its highest close since April 2015, according to FactSet data. It had been en route to finish at a nine-year high, but then gave up a little ground.
See:France ETF has biggest one-day pop since 2012 on election relief (http://www.marketwatch.com/story/france-etf-has-biggest-one-day-pop-since-2012-on-election-relief-2017-04-24)
European markets overall welcomed the French election result, with the Stoxx Europe 600 jumping 2.1% to end at 386.09.
Germany's DAX 30 index climbed 3.4% to finish at 12,454.98, scoring a fresh record closing high. Gains for the German benchmark accelerated after the Ifo business climate index for April unexpectedly rose to its highest level since July 2011 (http://www.marketwatch.com/story/german-business-sentiment-rises-unexpectedly-ifo-2017-04-24).
The U.K.'s FTSE 100 index climbed 2.1% to close at 7,264.68 (http://www.marketwatch.com/story/ftse-100-leaps-as-markets-take-heart-from-french-election-result-2017-04-24).
"Political uncertainty has been a headwind to global investors reallocating to Europe--we see significant potential for European fund flows to recover further," analysts at Bank of America Merrill Lynch said in a note on Monday.
The upbeat mood came after centrist Macron and far-right candidate Marine Le Pen came in first and second in France's presidential election on Sunday, qualifying for the second round on May 7.
Check out:4 things investors need to know about France's presidential runoff (http://www.marketwatch.com/story/4-things-investors-need-to-know-about-frances-presidential-runoff-2017-04-23)
Investors had feared two euroskeptics--Le Pen and far-left politician Jean Luc Melenchon--would make it to the runoff vote, as opinion polls had been showing an extremely tight race. Both candidates had promised to put France's EU membership up for a referendum, sparking fears of a so-called Frexit.
Macron is now leading the polls for the runoff vote, setting him on course to become France's next president.
Read:5 things to know about Emmanuel Macro, the man poised to be France's president (http://www.marketwatch.com/story/emmanuel-macron-5-things-to-know-about-the-man-poised-to-be-frances-president-2017-04-24)
On Monday, the yield on the 10-year French government bond dropped 11 basis points to 0.722%.
That helped the closely watched yield premium that investors demand to hold French bonds over benchmark German government paper to narrow to 42.40 basis points (http://www.marketwatch.com/story/french-bond-spread-narrows-to-4-month-low-as-frexit-fears-abate-2017-04-24), or 0.42 percentage points, the lowest since December. The spread had widened to around 75 basis ahead of Sunday's ballot.
"Investors who seek to benefit from today's news in company-related markets need to focus on equities, where the performance potential over the coming days is clearly higher, as stock markets did not react much to recent robust macro data," analysts at UniCredit said in a note.
See:The market is going bonkers over France's election--here's how in 5 wild charts (http://www.marketwatch.com/story/the-market-is-going-bonkers-over-frances-election-result-heres-how-in-5-wild-charts-2017-04-24)
The Stoxx Europe 600 banks index rallied 4.8%, with French lenders among biggest gainers. Shares of Credit Agricole SA (ACA.FR) soared 11%, BNP Paribas SA (BNP.FR) jumped 7.5%, and Société Générale SA (GLE.FR) rallied 9.9%.
Check out:Bank stocks ride high after Macron wins first round (http://www.marketwatch.com/story/european-bank-shares-light-up-in-relief-rally-as-euro-break-up-worries-subside-2017-04-24)
In other countries, shares of UniCredit SpA (UCG.MI) rose 13% in Milan, while Commerzbank AG (CBK.XE) added 9.4% in Frankfurt.
The euro also jumped on the French election result, buying $1.0851, up from $1.0727 late Friday in New York. That was around the highest trading level for the shared currency (http://www.marketwatch.com/story/euro-jumps-to-5-month-high-in-french-election-relief-rally-2017-04-24) since November.
(END) Dow Jones Newswires
April 24, 2017 12:06 ET (16:06 GMT)