In 2017, Macron and Le Pen competed against each other in the runoff.
(Photo: dpa)
Paris The uncertainty about the outcome of the French presidential election is reflected in the financial markets. The gap in the polls between incumbent Emmanuel Macron and right-wing populist Marine Le Pen narrowed shortly before the first round of voting on Sunday. Risk premiums on French government bonds are rising, French stocks are coming under pressure.
In an interview with radio station RTL on Thursday, Le Pen said with regard to market movements: “The disaster warnings if Emmanuel Macron is not re-elected, that’s a drama that doesn’t work anymore,” said the Rassemblement National candidate. You have presented a “serious project” for France, even if “the policy I want to make is not exactly for the stock exchanges”. Their goal is “to support the companies and return the money to the French”.
French bank shares such as BNP Paribas, Société Générale and Crédit Agricole were among the losers on the stock exchange in the past few days. Risk premiums for French government bonds have recently risen to their highest level since Macron was elected five years ago. The difference between ten-year paper and German bonds climbed to more than 50 basis points. However, that is still within limits: Before the French elections in 2017, the spreads were more than 70 points.
The far-right leader of the Rassemblement National has a realistic chance of being France’s next president.
(Photo: Reuters)
“In contrast to 2017, no candidate with a chance of becoming president is proposing France’s exit from the European Union, the ‘Frexit’,” writes Pierre Blanchet, Head of Investment Intelligence at the fund company Amundi. It is therefore unlikely that this election will generate high volatility on the financial markets. “Furthermore, despite their ideological differences, the key candidates all face the need to boost household purchasing power against a backdrop of high inflation and great uncertainty stemming from the war in Ukraine.”
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Le Pen has softened her choice of words and positions compared to 2017, when she lost to Macron in the runoff. So she said goodbye to the goal of taking France out of the euro.
In this election campaign, Le Pen also talks less about migration policy and more about the rising cost of living for the French. But investors remain uncertain as to what their continued Eurosceptic stance would mean for the EU should it actually win.
Pollsters see a repeat of the duel between Macron and Le Pen as the most likely result of Sunday’s first round of voting. A tighter result than five years ago is expected in the runoff election on April 24. In some polls on the possible second-round duel, Macron was only four to five percentage points ahead of Le Pen.
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“There was a little wake-up call now that Macron has a very small lead. Traders will brace themselves for the risk of a narrower victory or even defeat for Macron,” said Mohit Kumar, investment strategist at investment bank Jefferies. A surprise victory for the right-wing populist is possible, said Marco Bonaviri, head of the foreign exchange department and senior portfolio manager at Reyl & Cie.
The impact of a Le Pen election could be significant as the market is not currently pricing in this outcome. “We could see the euro depreciate across the board, euro-periphery government bond spreads widen, and euro-zone stocks underperform relative to US stocks.”
More on this: Macron under pressure: That’s why a victory for right-wing populist Le Pen is conceivable