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Macron vote result gives boost to Paris stocks, euro

Published

April 11, 2022

Agency Report

The Paris stock market and the euro received a boost on Monday from French President Emmanuel Macron’s election performance, with investors reassured about his re-election chances.

Frankfurt and London equities however followed Asian exchanges lower, with sentiment souring on flat UK economic growth.

Wall Street opened on the downside as traders looked ahead to inflation data due out on Tuesday, growth worries and the prospect of more aggressive US interest rate hikes.

Oil prices tumbled more than five percent at one point on Chinese demand fears arising from Covid lockdowns, and on dimming hope of a European embargo on Russian crude, dealers said.

“It is above all the bad news from China that is weighing on prices, as the number of Covid cases continues to surge,” said Commerzbank analyst Barbara Lambrecht.

Shanghai eased restrictions on some neighbourhoods on Monday after mounting outcry over China’s inflexible Covid-19 rules, which locked down 25 million people.

“The lockdowns that are slowing oil demand in the world’s second-largest consumer country threaten to persist for even longer,” added Lambrecht.

– ‘Solid result’ –

Macron topped France’s first-round presidential vote on Sunday, leading far-right rival Marine Le Pen by a larger-than-expected margin.

The incumbent president won 27.85 percent of votes, while Le Pen scored 23.15 percent.

“A solid result for incumbent Emmanuel Macron … has helped to allay fears of a Le Pen presidency,” said economist Jessica Hinds at research consultancy Capital Economics.

“But the latest polls still point to a very tight race.”

Investors had fretted about the implications of a victory for Le Pen in the midst of the war in Ukraine, given her long-standing sympathies for Russia.

“All attention will now turn to the second round (vote) on April 24, and the big question for that will be where the supporters of the defeated first-round candidates go,” wrote Deutsche Bank analysts in a client note.

Most of the gains on the Paris exchange’s main CAC40 index evaporated as the day wore on.

However “providing a lift to the CAC40 is French bank Societe Generale after announcing it had managed to sell its Russian unit Rosbank, to Moscow based lender Interros Capital while also taking a three-billion-euro write down on the business”, said market analyst Michael Hewson at CMC Markets UK.

Societe Generale shares rose 5.0 percent.

On the downside, London stocks slid on official data showing that the UK economy had ground to a near halt in February, growing by just 0.1 percent.

– Dollar eyes 2002 yen peak –

Elsewhere, the dollar hit a 2015 high at 125.77 yen on expectations of more US Federal Reserve interest rate hikes, in contrast with the Bank of Japan’s loose policy.

That was not far from the greenback’s two-decade peak of 125.86 yen.

Hewson at CMC Markets said dollar has “the potential to move above 125.90 and an almost 20-year low, as the gap between US and Japanese yields continues to widen out”.

The Fed has recently taken a hawkish tone as it embarks on an aggressive tightening path to counter runaway inflation, leading yields on US bonds to rise.

In China, factory-gate inflation was higher than expected in March, official data showed, as Russia’s war on Ukraine pushes up oil prices while a domestic Covid-19 resurgence strains food supplies and consumer costs.

The producer price index — measuring the cost of goods at the factory gate — grew 8.3 percent on-year, National Bureau of Statistics (NBS) figures showed.