Macron defeats Le Pen to become French president in boost to EU

Bloomberg

Emmanuel Macron beat the anti-euro nationalist Marine Le Pen in France’s presidential election.
Macron, a 39-year-old centrist, leads Le Pen by about 65 percent to 35 percent, according to the estimates of four separate pollsters. The firms sampled real votes as they were being counted and weighted their results to reflect the composition of the French electorate. Their projections were all within 1 percentage point.
Le Pen conceded defeat in a televised statement.
The victory will prove a relief for markets after a campaign that saw bond yields fluctuate in tandem with the fortunes of Le Pen’s bid to take France out of the euro.
A pro-European globalist, Macron will have to unite a divided France after one of the most bitter and turbulent elections of modern times. His challenge will be to end years of high unemployment and sluggish growth, deal with the terrorist threat that has
traumatized the country and, ultimately, restore faith in the political establishment.
The election brings to an end a tumultuous campaign that culminated in a hacking attack on the Macron camp on the eve of polling. Surprises littered the way to Sunday’s runoff. The incumbent Francois Hollande decided not to seek re-election, a first for a sitting president, while former head of state Nicolas Sarkozy and former Prime Minister Manuel Valls suffered humiliating defeats in their parties’ primaries.
Markets had largely priced in a victory for the centrist, meaning the scope for a relief rally may be more limited this time. Still, Le Pen’s defeat removes a cloud that has been hanging over the shared currency for most of 2017, and will strengthen its longer-term outlook, according to analysts. Thin liquidity in early Asian trading could also lead to exaggerated moves when currency markets open at 7 a.m. local time in New Zealand.
“The euro is likely to gap higher by less than a cent as traders in New Zealand run stop losses,” Sebastien Galy, a macro strategist at Deutsche Bank AG in New York, said in emailed comments. “In the weeks to come, inflows into euro zone equities should give the euro some support, but so will other factors.”
The shared currency closed at $1.0998 on Friday, up 2.5 percent since the first round of voting on April 23.
UniCredit SpA, which currently expects the shared currency to finish the year at $1.10, is likely to revise higher the forecast if the second round passes without any surprise, strategists including Vasileios Gkionakis said in a note to clients before the vote.
Nomura Holdings Inc., and Bank of America Merrill Lynch both expect more gains for the euro, with the Japanese bank looking for a rebound to at least $1.15 in the next three to four months.

French Rally
The euro touched a six-month high of $1.10 last week, while French bonds and stocks have jumped since the first round of voting. The spread between French and German 10-year yields, seen as a key metric of investors’ concern before the vote, narrowed to the lowest since January on Friday, down from a four-year high in February.
French, Italian and Spanish stocks have been the big winners from the drop in perceived political risk since the first round.
The CAC 40 has gained more than 7 percent, while the FTSE MIB is up almost 9 percent and the IBEX is up more than 7 percent. This compares with a gain of 2 percent for the S&P 500 and of 3 percent for the MSCI World index over the same period.
“It seems that political risks have subsided considerably already ahead of the vote,” Valentin Marinov, head of G-10 FX research at Credit Agricole, said on Friday. “This much could keep any gains fairly muted.”