AMSTERDAM/LONDON (Reuters) – Marine Le Pen’s far-right National Rally (RN) party won the first round of France’s parliamentary election on Sunday, exit polls showed, but the final result will depend on days of horse-trading ahead of next week’s runoff. .
The euro gained about 0.23% to trade around $1.0736 in early Asia-Pacific trade.
European markets have rallied since President Emmanuel Macron took the shock decision on June 9 to call snap elections.
The prospect of a far-right victory, or the leftwing, has unsettled investors, as both have promised large increases in spending, which could undermine France’s already fragile finances.
COMMENTS:
PETER GOVES, HEAD OF MARKET ENHANCED CREDIT RESEARCH, MFS MANAGEMENT, LONDON:
“A hung parliament would appear to be a base case, contrary to market expectations. That said, uncertainty is high and NR looks set to be the largest party in the new Assembly.
“We would caution against making too strong a decision about what the seats look like, because a lot of the results seem to be three-person contests. This makes things difficult.
“How the leaders react and how the coalition works will ultimately matter. A hung parliament is not politically correct, but it is not an unfriendly market outcome.
“So, OAT-Bunds may be comforting, but we are struggling to see tangible and sustainable returns.”
FIONA CINCOTTA, SENIOR MARKET ANALYST, CITY HEAD, LONDON:
“I think ‘source, there was no surprise’, so there was a sense of relief there. Le Pen had a smaller margin than the polls indicated, which may have helped the euro to rise a bit in the open.”
“It will be closely watched on July 7 to see if the second round supports the majority or not. So it feels like we’re in a bit of limbo, but the relief is that it wasn’t too bad. “
DAVID MORRISON, SENIOR MARKET ANALYST, TRADE NATION, LONDON:
“One of the things you think about is that this is going to be a big protest against Macron and the good RN.”
“However, it will take a while to find out what that percentage of their votes is, because the votes were very good and they are increasing and Macron was approaching 20% and that. it was going into a lot of concern about France, Europe and the euro and the French version of the Truss that it might have.”
“We won’t know anything before next Sunday. How will it go, if those three votes reach two, because there is a group standing down and backing down against the RN, what does that mean? That’s all open for now. What we will look at is a bit of uncertainty in all European indices and the euro going into next week. “
MICHAEL BROWN, CHIEF MAYOR, PEPPERSTONE, LONDON:
“Maybe the result is not as bad as the market feared. Exit votes…Le Pen’s party won between 240 and 310 seats, so the total is just shy of a majority.”
“We have also seen a lot of talk that some parties are looking to maybe release their candidates to avoid the seats that will win the National Rally in the runoff next Sunday.”
“The market may take a little comfort from that. However, the inherent risks that existed on Friday at the close remain.”
“The two most likely scenarios for the RN, although the chances of that have decreased slightly… or we end up with a hung parliament and a tense situation that ends up taking weeks if not months of negotiations to try again.” to form a government.”
“It’s a matter of waiting and seeing where the actual results of the first round elections end up, because there is a wide spread in terms of seat numbers based on vote shares.”
“The volatility of the euro and French stocks in particular will remain high for the next few days until next Sunday.”
PHILIP SHAW, ECONOMIST, INVESTEC, LONDON:
“The overall results are not too far from a majority vote but obviously because of the electoral system, we really don’t have a clear idea of what the distribution of seats will be like.”
“Everything is ready. We may know more when we get the statistics of the first round to see how many deputies were elected in the first round and what the battles of the second round might be. We shed more light on the situation, but obviously, there are many question marks that will remain even after the result is in.
“Much will be done – because we don’t know if they will get a majority – depending on how the socialization process is between the possible National Rally government and Macron himself. The question remains open.”
CARSTEN BRZESKI, GLOBAL HEAD OF MACRO, ING, FRANKFURT:
“With this result, the markets are looking at another week of really high uncertainty. Almost fear, as it is still possible that the RN will get an absolute majority next week.”
“This confirms what the markets see as a very disturbing situation.”
“I would expect another widening of the spread (of the French-German bond) from tomorrow and we may see a slight decrease in the.”
“There’s a lot we’re going to be dealing with in the coming days in terms of new polls that will show what this could mean for individual seats.”
“From the market’s point of view, a victory for the leftist party would have been an even worse scenario, although it was initially unlikely.”
