Le Pen Fuels Early Gain With Reassurance on Institutions – Europe Market Wrap

With most of the early gains spurred by French far-right leader Marine le Pen’s vow to respect political institutions if she wins the impending snap legislative election, global stocks and bonds remained under pressure.

S&P 500 contracts declined in tandem with the STOXX 600 index, which tracks Europe as a whole. The benchmark CAC 40 for France lost all of its initial 1% gain and is now trading lower. Bond rates in the Eurozone increased, with France’s yield premium over Germany remaining close to its biggest level in recent memory. After falling over 1% versus the dollar last week, the euro was slightly stronger today.

The demands for a sudden election last week by French President Emmanuel Macron, which might benefit far-right organisations like Le Pen’s National Rally, led to a selloff that left global markets trying to recover. When Le Pen seemed to reassure investors by saying that she would not strive to unseat Macron if she won the election, European assets initially rose. However, the gains were swiftly erased.

But investors will probably continue to be cautious about Europe after the first round of elections on June 30. Analysts from Citi stated that they prefer the US market and cautioned that one risk element for European shares is a possible far-right majority in France.

-Anxiety over monetary policy in the markets may possibly resurface this week. At its Thursday meeting, the Bank of England may send a message that rate-setters will have to hold off on easing policy until at least August due to the July 4th election and ongoing pricing pressures. Peers gathering this week in Australia and Norway do not appear to be in a rush to lower rates either.