French stock futures rose sharply and government bond prices rose on Monday, as investors digested the victory of the far-right National Rally in Sunday’s first round of parliamentary voting, which many had already predicted.
Marine Le Pen’s National Rally (RN) party and its allies won a historic victory on Sunday, but the final outcome will depend on days of alliance-building and next week’s run-off vote.
CAC 40 futures rose nearly 3%, suggesting a strong rally in the blue-chip index in early trading, while prices on 10-year French government bonds rose, pushing yields down about 2 basis points to 3.272%.
The gap between 10-year French bonds and 10-year German debt narrowed 7 basis points to 72.8 basis points, marking the biggest one-day decline since November 2022, but still within sight of last week’s 12-year high of above 82 basis points.
The RN and its allies won 33% of the vote, followed by a left-wing bloc with 28% and President Emmanuel Macron’s centrists with just 20%, according to official results from the Interior Ministry on Monday.
“A hung parliament remains the most likely outcome. While the RN could still win an absolute majority of seats in the second round, this now seems slightly less likely than before. The tail risk scenario that the united left could take power and implement its expensive program seems to have receded further,” said Holger Schmieding, chief economist at Berenberg.
The euro, meanwhile, rose as much as 0.5% to a two-week high of $1.0767.
