You have to hand it to the French polling organisations for delivering a much-needed boost to the reputation of their profession. The first round of the French presidential election on 23rd April went according to the script: Centrist Emmanuel Macron won 23.8% of the vote, far-right Marine Le Pen received 21.5%,centre-right Francois Fillon 19.9% communist-backed Jean-Luc Mélenchon 19.6% and socialist Benoît Hamon 6.4%.
The result pits Macron against Le Pen in the second round which will take place on 7th May . This is first time in the history of the Fifth Republic that there is no candidate in the run-off from either of the established parties. An IPSOS poll taken just after the result of the first round has Macron beating his rival by 62% to 38% in two weeks’ time.
Market reaction was swift. The euro rose by over a cent to $1.0850. Eurozone equities opened +3.4% and French bond spreads narrowed by some 20 basis points over German bunds. The fact that German bund yields also rose, indicates an unwinding of a flight to safety that has been ongoing ahead of this vote. US equity futures also indicated a positive start on Wall Street.
Macron and Le Pen are poles apart on all of the major issues such as immigration, the economy and France’s position in Europe. Macron is reform minded, pro-European and wants an inclusive France. Le Pen is anti-globalisation, wants to take France out of the euro and halt immigration immediately.
Macron will expect support from a broad range of voters, including those who voted for Fillon in the first round. The Republican candidate has asked his voters to support Macron. Mélenchon is yet to direct his supporters, but it is unlikely that those who voted for the hard-left candidate would switch their support to Le Pen in the second round.
Whoever becomes the new president, their ability to drive their agenda will depend on finding support from other parties in the legislature. As it stands, Le Pen’s National Front has just two seats in parliament, and little support from other parties, while Macron’s En Marche! party will be running for the first time in the upcoming legislative elections, which take place on 11th and 18th June. Although En Marche! will no doubt have momentum behind them if Macron becomes president, it is unlikely to achieve a majority in parliament. This means that deals will have to be done, which may curtail Macron's economic reform agenda.
Nevertheless, with some very unpalatable second-round combinations off the table, (Mélenchon versus Le Pen was the nightmare scenario), and the pollsters behind Macron, financial markets can now refocus Europe’s ongoing economic recovery and the upcoming earnings season.