Adam Shell

USA TODAY

The Nasdaq composite closed at a new high and the Dow Jones industrial average climbed more than 200 points after the first round of the French presidential election sent a pro-business, euro-friendly candidate into next month's final contest.

The runoff election on May 7 to determine France's next president will pit a centrist and market-friendly candidate, Emmanuel Macron, against the far-right's Marine Le Pen, who is anti-euro and against globalization.

Investors around the world had feared a worst-case outcome this weekend: a final vote between Le Pen and far-left candidate Jean-Luc Melenchon, which would have meant that a candidate in favor of France breaking from the European Union would win.

After that did not happen, investors moved back into stocks and pared back on assets like gold on Monday.

The voting results sparked a relief rally in stocks that began in Asia, gained power in Europe and spread to Wall Street.

On Wall Street, the Nasdaq composite gained 73.30 points, or 1.2%, to close at 5983.82 — a record high. The Dow closed up 216.13 points, or 1.1% higher, at 20,763.89. The Standard & Poor's 500 stock index rallied 25.46 points, or 1.1%, to 2374.15.

With political risk receding for the time being in Europe and the final French vote two weeks away, Wall Street will pivot back to market drivers back home, analysts say.

President Trump's administration could unveil its tax-reform proposal as early as Wednesday after delays following the Republicans' failure in late March to vote on a bill to replace Obamacare. The U.S. government, meanwhile, is at risk of running out of money and could shut down later this week if federal lawmakers can't agree on a funding bill.

"That adds to the market uncertainty," said Chris Gaffney, president of EverBank World Markets. "We keep walking through all these minefields. So far we have been able to make it though. But we have a dysfunctional government, so we will see."

The first-quarter corporate earnings season also remains busy, with companies including heavy-equipment maker Caterpillar, auto dealer AutoNation, and soda and snack giant Coca-Cola reporting results Tuesday. Quarterly earnings are on track for 11% growth, the best since the third quarter of 2011, according to earnings-tracker Thomson Reuters I/B/ES.

French politics was the main market driver Monday, however. Investment pros reacted bullishly because Macron is viewed as business-friendly and campaigned on keeping France in the eurozone, a platform investors view more favorably. The upbeat market reaction suggested investors see Macron defeating Le Pen. Polls currently show Macron leading by a wide margin in the final round.

"We see this as a positive surprise," Richard Turnill, global chief investment strategist at BlackRock, wrote in a post-election report. "This result should lead to a material reduction in the perceived political risk in Europe."

Luca Paolini, chief strategist at U.K.-based Pictet Asset Management, says growth in Europe, which has been improving, is likely to continue unless "something big," happens, such as a surprise win by Le Pen on May 7. He now views Italy, whose banking system is still vulnerable due to badloans, as the next potential crisis in the eurozone. "Political risk," he warns, "can explode at anytime" in Europe.

European stocks soared as investors shifted their focus from political risk in France to an improving European economy. The CAC 40 index in France finished the day up 4.1%, its biggest one-day advance since June 2012. German shares also jumped, with the DAX index rising 3.4%.

Shares of European banks rose, with French bank BNP Paribas (BNP) gaining 7.5% and Germany's Deutsche Bank rising more than 11%. The euro currency also rallied, rising 1.3% versus the dollar.

In Asia earlier Monday, the Nikkei 225 in Japan closed 1.4% higher.

So-called havens, like gold, retreated. Gold dropped by $11 per ounce, or about 1%, to $1,278.00. And the price of the 10-year U.S Treasury fell, with the yield briefly rising above 3%. It later retreated to 2.275%.

Investor anxiety also was in retreat. A closely watched Wall Street fear gauge, dubbed the VIX, declined more than 25% to its lowest level since mid-February.

"Markets around the world are breathing a sigh of relief," said John Stoltzfus, chief investment strategist at Oppenheimer.