Marine Le Pen’s Rassemblement National wins the first leg of the French elections, but the number of votes obtained does not allow him to have an absolute majority. To decide who will be appointed head of the French government, everything has been postponed to the second round on July 7. The outcome of the vote has however sent a clear message: the wind is blowing to the right, with the group that has as its candidate President Jordan Bardella leads with 33.2% of preferences, ahead of the far-left Nouveau Front Populaire with 28% and the Ensemble alliance of President Emmanuel Macron at 22.4%.
The dispute is very open and this time too the right may not lead the executive. In the last few hours, the odds of an alliance between Macron and the far left have risen. France’s center and left-wing parties agreed on Sunday evening to limited electoral cooperation to prevent Le Pen from taking power. Discussions are underway to decide whether to withdraw candidates from many constituencies so that votes against the Rassemblement National are not split. After the first round, in over 300 constituencies there will be a three-way ballot (in France, those with more than 12.5% of votes enter the ballot in single-member constituencies), an unprecedented number. There will be until tomorrow to decide the lineups for the second round.
“The lesson tonight is that the far right is on the verge of taking power. Our objective is clear: to prevent the Rassemblement National from having an absolute majority in the second round and govern the country with its disastrous project,” said Macron. However, decisions on cross-support between the NFP and Ensemble will be made on a case-by-case basis based on whether “a left-wing candidate is compatible with republican values.”
French elections: the reaction of the markets
The anti-Rassemblement National front has reassured the markets, which are now more convinced that Le Pen can be contained. European stock markets opened the week with increases of more than one percentage point, while the euro recovered ground against the dollar. On the bond front, the yields of French 10-year OATs jumped to 3.335% exceeding the high of the week following the European elections of 6-9 June, when Macron shocked the markets by announcing the dissolution of the French parliament.
“There is a sense of relief that the first round of the French election was not completely in Le Pen’s favor as the polls indicated,” said Tony Sycamore, market analyst at IG. “This raises hopes that the Rassemblement National will not obtain an absolute majority and therefore will not be able to open the purse strings of the French government with a proposal that has unnerved the bond markets.”
Claudia Panseri, director of investments for France at UBS Wealth Management, agrees, saying that “the markets are quite happy that there is no absolute majority. The most extreme scenarios for the spread have been ruled out.”
In the opinion of Mohit Kumar, strategist at Jefferies “with the result still uncertain for the second round there is no rush to buy French assets”. This does not mean that the risk of a scenario is less likely Frexit“, with the two extremes of French politics “not having a free mandate to implement their policies,” which means “a relief rally” for the markets. Alex Loo, currency and macro strategist at TD Securities, is instead cautious and points to the U.S. dollar as a safe haven. “There is a lot of election uncertainty and we think the dollar will be the best hedge against risk aversion.”
