Global stocks rally, euro climbs, tracking French election

FILE – The New York Stock Exchange is shown on June 11, 2024 in New York. European markets have opened with gains on Monday, June 24, 2024, and Asian benchmarks retreated after U.S. stocks coasted to the close of their latest winning week. (AP Photo/Peter Morgan, File)

New York, United States — The euro and global equity markets mainly rose Monday amid signs France’s far right would not win enough seats for an overall majority in legislative elections.

The far-right National Rally (NR) party of Marine Le Pen won a resounding victory in the first round of polls Sunday, with President Emmanuel Macron’s centrists trailing in third behind a left-wing coalition.

But the key question ahead of the second round on July 7 was whether the RN would win an absolute majority in the new National Assembly.

READ: Euro edges up on easing worries about French election

“The French election results have led to a sigh of relief from financial markets,” noted Kathleen Brooks, research director at XTB trading group.

“The market is experiencing a relief rally that NR looks unlikely to achieve an absolute majority,” said Fiona Cincotta at StoneX.com.

“This result had been considered the worst-case scenario, given fears of high fiscal spending and mounting debt levels, which had pulled stocks and, particularly, banks lower heading into the first round of the election.”

Macron and his allies have begun a week of intense campaigning ahead of the second round of legislative polls to deny the NR an absolute majority and control of government.

Still, a hung parliament could lead to months of political paralysis and chaos, analysts say.

It could “reduce the chance of a big spending splurge, but wouldn’t exactly help sort France’s fiscal position, which is already quite fragile”, said Neil Wilson, chief market analyst at Finalto.

READ: Paris stock market surges at open as traders mull vote

Chris Beauchamp, chief market analyst at online trading platform IG, sounded a note of caution in suggesting that “for now European markets are enjoying a relief rally, but with French (sovereign bond) yields still rising there is plenty of nervousness about the outlook for France and the French economy.”

At the close, the Paris CAC 40 index had added 1.1 percent having opened up around 2.5 percent.

Frankfurt also advanced, adding around 0.3 percent after Germany’s official inflation rate slowed more than expected in June, in welcome news for the European Central Bank following last month’s first interest rate cut since 2019.

Back in New York, the Nasdaq powered to a fresh record behind strong gains by Apple, Microsoft and other tech giants.

US markets shrugged off an increase in Treasury yields that analysts tied to rising expectations that Donald Trump will win the presidency.

Cresset Capital’s Jack Ablin expected Trump to extend tax cuts, pushing back Federal Reserve interest rate cuts.

“The rates are long and really going up in response to the shift in populism here and abroad, mostly here with the likelihood of Trump becoming president,” Ablin said.

“It looks like a higher for longer trade” in terms of US monetary policy, Ablin added.

London meanwhile advanced, if by a whisker, as Britain gears up for its own general election on Thursday, with the main opposition Labor party on course to end 14 years of Conservative rule.

The Tories, led by Prime Minister Rishi Sunak, have trailed badly in polls throughout the campaign.

Key figures around 2030 GMT 

New York – Dow: UP 0.1 percent at 39,169.52 (close)

New York – S&P 500: UP 0.3 percent at 5,475.09 (close)

New York – Nasdaq: UP 0.8 percent at 17,879.30 (close)

Paris – CAC 40: UP 1.1 percent at 7,561.13 points (close)

London – FTSE 100: FLAT at 8,166.76 (close)

Frankfurt – DAX: UP 0.3 percent at 18,290.66 (close)

EURO STOXX 50: UP 0.7 percent at 4,929.99 (close)

Tokyo – Nikkei 225: UP 0.1 percent at 39,631.06 (close)

Shanghai – Composite: UP 0.9 percent at 2,994.73 (close)

Hong Kong – Hang Seng Index: Closed for holiday

Euro/dollar: UP at $1.0743 from $1.0713 on Friday

Pound/dollar: UP at $1.2648 from $1.2645

Euro/pound: UP at 84.92 pence from 84.72 pence

Dollar/yen: UP at 161.46 yen from 160.88 yen

Brent North Sea Crude: UP 1.9 percent at $86.60 per barrel

West Texas Intermediate: UP 2.3 percent at $83.38 per barrel