The European stock market rose today on signs that France’s Hard-Right will not be able to win enough seats in the legislative elections for an overall majority.
On the bond market the premium investors demanded to hold French government bonds fell from its 12-year-high.
Analysts said that investors hoped there would be less chance for either the Hard-Left, or the Hard-Right to have the freedom to implement big-spending policy that could harm France’s fiscal situation.
Marine Le Pen and her National Rally party (RN) won the first round in France’s parliamentary election. However, the outcome of the run-off vote next week will depend on the days spent building alliances.
Fiona Cincotta is an analyst for City Index, owner of StoneX. She said: “The Market is experiencing a relief rallie that NR appears unlikely to achieve an absolut majority.”
The worst-case scenario was this result, as it was a direct result of fears about high fiscal spending, mounting debt, and falling stock prices, especially in the banks, before the first round.
Analysts say that a hung Parliament could cause months of political chaos and paralysis.
Neil Wilson, Chief Market Analyst at Finalto, said that it could “reduce the risk of a large spending spree, but would not help France’s fragile fiscal situation”.
The Paris Cac 40 index closed up 1.1pc. The German Dax rose 0.3pc while the Stoxx 600 pan-European index also gained a similar amount. The FTSE 100 remained flat.
The difference between the yields of German and French 10-year sovereign bonds, which is a measure of the risk premium that investors are willing to pay to own French bonds, has narrowed by 0.06 percentage point to 0.74 percent.
Post Disclaimer