European financial markets breathed a sigh of relief on Monday morning after the first round of France’s parliamentary elections left President Emmanuel Macron’s party with a fighting chance of still being able to influence the next government.
The euro rose half a percent against the dollar to its highest in two weeks, and the benchmark French CAC 40 stock index jumped more than 2.5 percent at the opening, while the risk premium attached to French government debt — a rough proxy for political risk — fell clearly.
On Sunday, the hard-right National Rally of Marine Le Pen and Jordan Bardella had, as expected, emerged as the strongest force from the first of two rounds of voting, gaining some 34 percent of the nationwide vote. The ad hoc alliance of progressive forces, known as the New Popular Front, polled second with 28 percent, while Macron’s party, Together, trailed in third place with 20 percent.
“A hung parliament remains the most likely outcome,” Berenberg Bank Chief Economist Holger Schmieding said in a morning note to clients, arguing that the likelihood of either the far right or the left taking power on their own had receded with the weekend’s results.
The second round of the election will be held this Sunday.