Risk back on as French vote ripples across stock markets

Bloomberg

Relief rippled across markets from stocks to bonds and currencies on bets that pro-growth centrist Emmanuel Macron will become France’s next president. Havens including gold, the yen, Treasuries and bunds fell out of favor.
Every industry group in the Europe 600 Index rose, volatility fell by a record, and the cost of insuring against losses on French banks’ junior debt fell by the most in almost seven years after Macron advanced as favorite in runoff over nationalist Marine Le Pen. Gold was on course for its biggest drop in seven weeks and the yen was the worst performer among major currencies. Hinting that early euphoria may have been overdone, the euro scaled back gains after its best open on record.
The results of the weekend vote, in which both establishment parties were eliminated, triggers a second-round on May 7 between two strikingly different visions of the country’s future. Le Pen, who wants to take France out of the euro and clamp down on immigration, has trailed Macron, a committed globalist, in almost every opinion poll for the runoff by a margin of some 20 percentage points. A snap Ipsos survey late on Sunday suggested he’d win by 62 percent to 38 percent for Le Pen.
“Macron will not only help stabilize the European Union, but also help build stronger support mechanisms,” Azad Zangana, senior economist for Europe at Schroders Plc in London, wrote in a note to clients. “The contest is not over yet, but investors are likely to take comfort and to begin to think about the more attractive valuations that European equities offer.”
US President Donald Trump tweeted on Saturday that he plans to announce a “big” tax reform and reduction plan on April 26. Meanwhile, a US government shutdown is possible on April 29 if Congress doesn’t approve a spending bill to fund the government past April 28. The spotlight returns to North Korea on Tuesday, as the world waits to see if Kim Jong Un marks the 85th anniversary of the Korean People’s Army with another provocation. The earnings season is in full swing.
Alphabet Inc., Microsoft Corp., Amazon.com Inc., Twitter Inc., Intel Corp., Credit Suisse Group AG, Barclays Plc, Bayer AG, Daimler AG and Total SA are among many major companies releasing earnings. The European Central Bank sets monetary policy on Thursday. With officials indicating little chance of a policy change, the focus will be on any signals from President Mario Draghi that ECB is starting to discuss exit from its extraordinary stimulus. US GDP is due at the end of the week.
The economy probably expanded at a 1.5% annualized rate in Q1, the weakest pace in nearly a year, the estimate is projected to show. The euro climbed 1.1% to $1.0849 as of 8:22 a.m. in New York. It soared 2% earlier. Other European currencies also rallied, with Swedish krona and the Norwegian krone each increasing at least 1.8 percent. The yen fell 1.1 percent to 110.25 per dollar, after capping the first weekly loss in three on Friday. The Bloomberg Dollar Spot Index slipped 0.5 percent, trading at the lowest level since the US election in November.