Bank shares jump in Europe after French election
French stocks rallied on Monday after centrist Emmanuel Macron won the first round of voting in the French presidential election, easing fears that two anti-European Union candidates would be in the final runoff.
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The CAC 40 index climbed 4.2% to 5,273.50, setting it on track for its biggest one-day percentage gain since August 2012. If the French benchmark ends Monday at that level, it'll mark the strongest close since January 2008, according to FactSet data.
Other European markets also welcomed the French election result, with the Stoxx Europe 600 jumping 1.9% to 385.19.
Germany's DAX 30 index jumped 2.8% to 12,391.69, on path for 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 1.8% to 7,242.60 (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 re-allocating 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.
Read: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.
On Monday, the yield in 10-year French government bonds 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, 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.
The Stoxx Europe 600 banks index rallied 4.4%, with French lenders among biggest gainers. Shares of Credit Agricole SA (ACA.FR) soared 8.9%, BNP Paribas SA (BNP.FR) jumped 8.5%, and Société Générale SA (GLE.FR) rallied 9.6%.
In other countries, shares of UniCredit SpA (UCG.MI) rose 10.5% in Milan, while Commerzbank AG (CBK.XE) added 9.1% in Frankfurt.
The euro also jumped on the French election result, buying $1.0876, 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 05:46 ET (09:46 GMT)