Equity markets, euro rally in wake of French election

NEW YORK (Reuters) – Global equity markets rallied on Monday, boosting a gauge of world stocks to a record high, while the euro briefly jumped to a five-month peak against the U.S. dollar as the first round of an election in France went to the market’s preferred candidate.

Centrist Emmanuel Macron took a big step towards the French presidency on Sunday by winning the first round of voting and qualifying for a May 7 runoff alongside far-right leader Marine Le Pen.

The victory for the pro-European Union centrist Macron sent MSCI’s gauge of stock indexes across the globe (MIWD00000PUS) to a record high of 453.38.

The blue chip euro zone STOXX 50 index (STOXX50E) surged 4 percent and was headed for its best day in nearly two years, while France’s CAC40 (FCHI) climbed 4.2 percent and was on track for its biggest daily percentage gain in almost five years.

Investors were concerned a victory for Le Pen could eventually put France on the path taken by Britain to leave the European Union.

“The nice thing about putting a black swan, geopolitical disaster situation behind you is you can start focusing on fundamentals,” said Art Hogan, chief market strategist at Wunderlich Securities in New York.

“Coming into the weekend you had all that sort of risk off behavior that gets unwound pretty quickly when the disaster is avoided.”

The Dow Jones Industrial Average (DJI) rose 207.41 points, or 1.01 percent, to 20,755.17, the S&P 500 (SPX) gained 23.31 points, or 0.99 percent, to 2,372 and the Nasdaq Composite (IXIC) added 63.84 points, or 1.08 percent, to 5,974.37.

The pan-European FTSEurofirst 300 index (FTEU3) rose 1.99 percent and MSCI’s gauge of world stocks (MIWD00000PUS) gained 1.43 percent.

The euro pared earlier gains, but was still up more than 1 percent against the dollar <eur=> and more than 2 percent up against the yen (EURJPY=).

There was also an unwinding of safe-haven trades.

Shorter-term German bonds <de2yt=tweb> saw their biggest sell-off since the end of 2015 as investors piled back into French <fr10yt=tweb> as well as Italian, Spanish, Portuguese and Greek debt.

Benchmark 10-year notes (US10YT=RR) last fell 15/32 in price to yield 2.2874 percent, from 2.236 percent late on Friday.

The Japanese yen <jpy=> weakened 0.8 percent versus the greenback at 109.97 per dollar. Wall Street’s so-called fear-guage, the VIX volatility index (VIX), plunged the most since November.

Spot gold <xau=> dropped 0.9 percent to $1,272.03 an ounce. U.S. gold futures fell 1.21 percent to $1,273.50 an ounce.

Meanwhile, investors are gearing up for the busiest week for corporate results in at least a decade on Wall Street, with more than 190 S&P 500 companies, including heavyweights Alphabet (O:GOOGL) and Microsoft (O:MSFT), due to report.

Asia also saw a risk rally. MSCI’s broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) closed 0.61 percent higher, while Japan’s Nikkei (N225) rose 1.37 percent.

Oil prices continued to decline after last week’s selloff, weighed by signs U.S. production and inventory growth were offsetting OPEC’s attempts to reduce a persisting global glut.

U.S. crude fell 0.97 percent to $49.14 per barrel and Brent was last at $51.54, down 0.81 percent on the day.

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