Stock markets surged and the euro jumped sharply after centrist candidate Emmanuel Macron won the first round of the weekend’s French presidential election, easing fears of a victory by the far-right Front National.

France’s Cac index climbed more than 4% to a nine-year high, its best daily performance since August 2015, as investors bet that Macron would defeat the other runoff candidate, the FN’s Marine Le Pen on 7 May. The first vote put Macron on 23.75% with Le Pen on 21.53%. The result was seen as the most market-friendly outcome, putting the independent former investment banker in pole position to fend off the anti-EU Le Pen.

The euphoric mood spilled over into other stock markets, with Germany’s Dax up 3.3% to a new closing peak and the FTSE 100 recovering 2.1% to 7,264 after last week’s slump in the wake of the UK general election announcement. . The FTSE 250 added more than 1% to hit a record closing high, while in Asia the Nikkei 225 ended up nearly 1.4%.

On Wall Street, US markets also rallied, with the Dow Jones Industrial Average up by about 200 points or nearly 1% by lunchtime and the Nasdaq Composite technology index hitting its best ever level.

Banking shares were among the leading gainers across the globe, lifted by the prospect of a more certain economic outlook for the eurozone if the EU-friendly Macron wins the final round of the election.



The VIX volatility index – the so-called fear index – fell by 22%, its biggest daily drop since the day after Donald Trump’s US election victory last November.



France's stock market hits nine-year high as election cheers investors - business live Read more

Meanwhile, the single currency hit a five-and-a-half month high against the dollar. Although it came off its best levels, it was still up about 1% against the dollar and the pound as European markets closed.

Sterling had its worst day against the euro since last October and analysts cautioned the currency was likely to remain volatile before the latest European Central Bank meeting on Thursday.

French government 10-year bond prices rose to three-month highs as concerns about the election eased.

Michael Hewson at CMC Markets said: “For markets, this was always the least bad option, with most expecting Mr Macron to become president in two weeks’ time as the other candidates endorse him over Marine Le Pen.

“But for all his market and EU-friendly rhetoric, Emmanuel Macron will face the same problems previous French presidents have faced, which means he will have to reach out across the political divide. This lack of support is likely to make him a lame duck president, only able to affect minor tweaks or changes.”

Trevor Greetham, the head of multi asset at Royal London Asset Management, said: “It’s worth noting that the French election is likely to be the first of several risks to test markets as thin summer trading comes into view.

“Signs of a temporary peaking out in global growth, the impact of tightening moves in China and, first up, a potential government shutdown in the US at the end of this week, mean investors can’t pop the champagne corks just yet.”



