Stocks rise sharply as investors cheer French election results
U.S. stocks joined a worldwide rally Monday after the first round of France’s presidential election raised expectations that the European Union will hold together. Emmanuel Macron, a candidate seen as pro-business, won the most votes Sunday, and many investors expect him to win a runoff against the remaining anti-EU candidate, Marine Le Pen, which is set for May 7.
The Standard & Poor’s 500 index closed up 25 points, or 1.1 percent, ending Monday trading at 2,374. The Dow Jones industrial average rose 216 points, or 1 percent, to close at 20,764, and the Nasdaq composite surged 73 points, or 1.2 percent, to finish at 5,984.
Prices for gold, Treasurys and other investments that signal fear in the market all sank, while the euro’s value surged against the dollar.
Coming into Sunday’s presidential election in France, several candidates railed against the European Union, one of the world’s dominant trading partners. A leading nationalist candidate, Le Pen, promised to follow the path set by last year’s vote in the U.K. to exit the European Union and the U.S. election of President Donald Trump -- a repudiation of the globalist free-trade worldview.
But after Macron, an independent seen as pro-business and friendly to the EU, won the most votes, France’s main index hit its highest point since 2008. France’s CAC 40 index surged 4.1 percent, while Germany’s DAX jumped 3 percent and the FTSE 100 in London rose 1.8 percent.
Many investors expect Macron to win the May 7 runoff against Le Pen. But the election, in which neither candidate belong to a mainstream political party, is unprecedented, and analysts expressed caution in predicting the final result.
“The reality is that [Macron] needs to secure another eight to ten million votes over the next two weeks to secure a victory,” wrote the Eurasia Group’s Charles Lichfield, citing some uncertainty that Macron’s anti-Le Pen coalition of center-right and far-left voters would hold together and vote in significant numbers in two weeks. “In our view, there is a 35 percent chance that a combination of protest votes and complacency leads to a Le Pen victory,” he wrote.
Macron risks losing if voters see him as too closely associated with the establishment, wrote research firm IHS Markit. “Despite the positive reaction seen so far, markets may become volatile again if polls show Le Pen breaking the 40 percent barrier in anticipation of the second round, or if a major terrorist attack in the period before 7 May gave further momentum to Le Pen’s campaign,” the firm wrote.
With expectations strengthening that the shared European economy will remain intact, the euro rose to $1.0871 from $1.0695 late Friday.