When Emmanuel Macron topped the first round of voting in the French presidential election two weeks ago, French stocks soared to near-decade highs. On Monday, the reaction to his victory in the runoff was decidedly subdued: investors had been fully expecting it and seem wary of the difficulties he’ll face reforming a divided country.
In midday trading, the CAC 40 index of leading French shares was down one per cent at 5,379. Other indexes across Europe were also trading lower, while the euro, which briefly hit a six-month high above $1.10 overnight, was down 0.5 percent at $1.0942.
In market parlance, it’s a clear case of buying the rumour and selling the fact.
“With markets having rallied throughout last week in expectation of a Macron win, there was little upside left for equities and the euro,” said Chris Beauchamp, chief market analyst at IG.
Pro-EU and global trade
The clear bias in favor of Macron in the markets over the far-right candidate Le Pen rests on a number of factors, above all related to his views on Europe. Macron is a keen advocate of the European Union and the euro currency, while Le Pen has proposed taking France out of both.
Macron’s victory has therefore pushed back any fear that France was on a road that could have led to the breakup of the EU and the euro itself. It’s also a further dent to the populist tide that many blame for Britain’s vote to leave the EU and the election of Donald Trump as U.S. president. For the third straight election in Europe, populists have fallen short – first Austria’s Norbert Hofer was defeated in the country’s presidential election; then far-right leader Geert Wilders did a lot worse than anticipated in Dutch elections.
Whatever Le Pen’s defeat means for populism’s long-term future, Macron’s victory cannot disguise the fact that France remains a deeply-riven society on a number of issues and those divisions are not going to go away anytime soon. Around 11 million people voted for Le Pen,…