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Markets briefed a sigh of relief on Monday morning as the results from the first round for French parliamentary elections filtered through
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The CAC 40 in Paris gained around 2% on Monday, while government bonds also strengthened following the results
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Marine Le Pen's far-right national rally emerged as the largest party with 33% of a vote
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followed by the new Popular Front, a left-wing alliance who garnered 28%
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Emmanuel Macron's Ensemble Party came third with only 20%. There's another round of voting to go next weekend, in which voters will choose between candidates
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managed to secure more than 12.5% in their constituency. Normally only two candidates make it through the first round
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but this year an unusually high number of seats will see three-way races
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Projections suggest a total of 307 seats could be fought as three-way runoffs
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a huge increase from 8 in 2022 and just 1 in 2017
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This means there's still a lot of uncertainty about the potential results. Last night, leaders of both the Left Wing Alliance and Macron-Centrist party
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indicated they withdraw candidates to help ensure the national rally didn win a majority So from the first round of results it looks unlikely that the National Rally will be able to form a government on its own This means it won be able to go through with his expensive legislative agenda
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which is why markets are so relieved this morning. The French economy is already dealing with high levels of national debt and a big government deficit
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A further round of spending increases could have sparked concerns about debt sustainability
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The most likely outcome at the moment looks like a hung parliament, where no party has an absolute majority
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This would likely lead to policy deadlock, in which the debt problem won't get worse, but nor will it improve
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Kathleen Brooks, research director at XTB, said a hung parliament could make it hard to get anything done in France
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which is exactly what the markets would like. ysts at Japanese Bank Numura said that this outturn is relatively market-friendly
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for the time being, as it should reduce the risk of the country's policies becoming far right
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and or materially fiscally expansive. traders will be paying close attention to the next round of results, which are due out this coming weekend
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We here at City AM would like to know how much of an impact you think the French elections will have here in the UK
