New records for DAX as banking stocks fly as investors price a Macron Presidency
Financial stocks are flying today after round one of the French election saw independent and pro-EU candidate Emmanuel Macron pitted against Marine Le Pen, in the round two run off in two weeks’ time, the pro-EU candidate is expected to win quite easily.
While the market reaction was one of a collective sigh of relief that saw the German DAX hit new record highs and the CAC 40 hit its highest levels since the end of 2007, the fact remains that for the first time since the 1960’s, the French election will be fought between two candidates that are outside the mainstream of traditional French politics.
While markets are celebrating what looks like a significant blow to the populist movement it would be a mistake for politicians to think that France’s problems are over.
Once the euphoria has subsided, the next question is likely to centre around as to whether Emmanuel Macron can deliver on his campaign promises of getting unemployment down to 7%, tweak French labour market rules and reduce taxes at a time when over 40% of the French electorate voted for an anti-EU candidate, and remain disillusioned with the French political elite.
France has consistently failed to deliver on its reform programs even when Sarkozy was president, which means any new president is likely to find it similarly challenging, particularly since he will be expected to abide by the terms of the fiscal compact, unless Germany decides that budget responsibility no longer matters.
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