Shares in several French banks soared by double digits on Monday, after centrist candidate Emmanuel Macron won the first round of the French election vote.
In early trading, shares in both Societe Generale and Credit Agricole rose more than 10 per cent while shares in BNP Paribas added around 9 per cent.
Stocks are generally considered to be relatively risky assets to hold during times of political and market uncertainty, especially stocks in banks.
They largely dipped in the lead up to Sunday’s vote, as investors favoured assets like gold, core government bonds and currencies like the Swiss franc and Japan’s yen.
But on Monday investors piled in, keen to make the most of discounted prices as it looked increasingly unlikely that an anti-establishment party would win the French presidential election in May.
“Markets are likely to sigh in relief as some tail risk scenarios can be priced out,” economists at UniCredit wrote in a note to clients.
Strategists at Swissquote Bank, said that "the failure of [far-right leader Marine] Le Pen or [hard-left challenger Jean-Luc] Melenchon to sway undecided voters or unlock closely-guarded voting behaviours will come as a major relief to investors fearing uncertainty over whether the second round would bring a new set of complexities”.
France’s benchmark CAC 40 index jumped by more than 3.5 per cent on Monday morning, spurring broader European stock markets.
But Neil Wilson, an analyst at ETX Capital, said that there are continued risks as the second and final round of voting on 7 May draw closer, not just in France.
“Assuming Macron goes on to win the second round, he will have a tough task assembling a government and pushing through the reforms the French economy needs,” he says.
“We can at least stick some of the big political risk to one side for a while, but with a major election in Italy looming there is considerable tail risk. Greece also remains a significant challenge,” he adds.
