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Asian Markets Swing Upward in Wake of French Election European Markets Swing Upward, Then Settle, in Wake of French Election
(about 5 hours later)
Markets in Asia climbed on Monday, starting just hours after the polls closed in France and showed a decisive victory by the centrist presidential candidate Emmanuel Macron. LONDON — Markets breathed a sigh of relief on Monday after Emmanuel Macron secured the French presidency in the second round of elections, but investor enthusiasm quickly waned as the focus shifted to the scale of the challenge facing him.
Japan’s Nikkei 225 rose about 1.8 percent in the first hour of trading and ended the day up 2.29 percent. The yen’s value remained about the same, at 112.75 to the dollar. Australian shares bumped up slightly as well, with the S.&P./ASX200 index closing up about 0.59 percent. China was an outlier; stocks in Shanghai dipped, with the SSEC falling about 0.85 percent over the course of the day.. The euro, which strengthened against the dollar after results were announced, pared its gains in the European morning and was down 0.32 percent to $1.0954 by early afternoon.
Shares in South Korea rose about 0.55 percent in the morning, and ended the day up 2.53 percent. That country’s presidential election — held after the impeachment of former President Park Geun-hye — will be on Tuesday. The CAC 40, the benchmark stock index for France, had inched down 0.86 percent by early afternoon, while indexes across Europe, including Germany’s DAX and the Euro Stoxx 50, were all a little lower.
Markets in Asia were also reacting to a strong jobs report in the United States on Friday, which suggested the global economy was on solid footing even as it reinforced the case for the United States Federal Reserve to continue building on recent interest rate increases. The yield on French government bonds fell, meaning that investors saw the country’s debt as being less risky, reducing France’s borrowing costs.
Analysts said markets would most likely take the Macron victory in stride, and anticipated a sense of normalcy returning to European trading. Mr. Macron comfortably defeated his far-right rival Marine Le Pen on Sunday, but analysts said markets were already looking ahead to French parliamentary elections next month. Mr. Macron faces a sizable challenge in obtaining a legislative majority that could enable him to keep campaign promises.
“The French election result confirms our view that markets until recently had overstated European political risks,” strategists at an investment institute sponsored by BlackRock, the world’s biggest asset manager, wrote Monday in a research note after Mr. Macron’s win. “Italian political risk and the country’s fragile banking system could move back into focus soon, however.” Opinion polls had indicated a Macron victory, helping to bolster investor enthusiasm toward the end of last week, so the market’s reaction to the results was limited, according to Jörg Krämer, the chief economist at Commerzbank.
Currency traders in Asia said a muted euro movement meant markets appeared to have priced in the Macron victory already. But the upcoming election in South Korea was still a source of uncertainty. “The biggest uncertainty was before the first round of the elections” in April, when it was unclear whether Mr. Macron would make it to the final round, Mr. Krämer said.
“The election seems to be on won investors’ minds, and the possible implications that may or may not have with U.S. and China relations,” Stephen Innes, a senior trader in Singapore at the foreign currency specialist Oanda, said in a text message. “Now there is residual uncertainty,” he said, adding that Mr. Macron was “unlikely to implement the tough necessary reforms that France needs.”
Investors were also looking ahead to other elections in Europe, he said, seeing particular risks in parliamentary races in Italy next year.
The muted reaction in European markets came after indexes in Asia climbed sharply in the hours after the polls closed in France.
The Nikkei 225 share index in Japan and other markets in the region were also reacting to a strong jobs report in the United States on Friday, which suggested the global economy was on solid footing even as it reinforced the case for the Federal Reserve to continue building on recent interest rate increases.