Global equities rally after French election results - 25.4.2017

Nasdaq closes at record high

US stocks rebounded on Monday joining the global rally after centrist Emmanuel Macron came ahead in first-round presidential elections in France relieving fears of a euroskeptic-only runoff. The dollar weakened as haven demand subsided with renewed euro optimism: the live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, fell 0.8% to 99.045. The Dow Jones average rose 1.1% to 20763.89, led by JP Morgan and Goldman Sachs shares, up 3.5% and 2.9% respectively. S&P 500 added 1.1% settling at 2374.15 led by financial, industrial and tech stocks, with nine of 11 main sectors recording gains. The Nasdaq composite index gained 1.2% closing at record high 5983.82.

French election relief added to support for US stocks from president Trump’s comment last Friday he would unveil a “massive tax-cut” package in the coming week. On Saturday Trump tweeted he would announce a big tax-reform package on Wednesday, reviving hopes for a boost for US economy following doubts about his ability to push pro growth reforms through Congress after his failure to secure support for the healthcare reform. Treasury Secretary Steven Mnuchin clarified on Monday that the tax plan would focus on middle incomes and “pay for itself” through economic growth. Today at 15:00 CET February S&P/Case-Shiller Housing Price Index will be released in US, the tentative outlook is neutral for dollar. At 16:00 CET April Consumer Confidence by Conference Board and New Home Sales for March will be published, the outlook is negative.

SP 500

Bank stocks lead European equities higher after Macron win

European stocks closed at sixteen month high on Monday after establishment candidate Emmanuel Macron won in the first round of the French presidential election. The euro hit more than five month high against the dollar while British Pound slid. The Stoxx Europe 600 index added 2.1%. The DAX 30 rose 3.4% to close at 12454.98. France’s CAC 40 rallied 4.4% and UK’s FTSE 100 gained 2.1% settling at 7264.68.

Bank stocks led the advance as Macron, who favors stronger ties between France and the European Union, will face off against the National Front’s Marine Le Pen who has pledged to take France out of both the European Union and the euro if she wins. The Stoxx Europe 600 Banks Index jumped 4.8%, Societe Generale surged 9.7%, Credit Agricole rallied 10.9% and Germany’s Deutsche Bank rose 9.2%. The yield premium of 10-year French bonds over German government bonds narrowed to 41.40 basis points as Fillon and several other candidates urged their supporters to back Macron in the second round and a poll late Sunday showed Macron is likely to win the runoff election by 62% to 38% over Le Pen. Today at 10:30 CET March Public Sector Net Borrowing will be released in UK, the tentative outcome is positive for Pound.

Asian markets advance as Macron win boosts risk appetite

Asian stock indices are rising today as investor risk appetite was boosted following the centrist victory in the first round of the French presidential election. Lingering North Korean tensions capped the gains as North Korea conducted a massive live-fire drill on Tuesday on the 85th anniversary of the foundation of its army. Nikkei ended 1.1% higher at 19079.33 today with yen retreating against the dollar. Chinese stocks are higher amid concerns over possible regulatory action and liquidity squeezes: the Shanghai Composite Index is up 0.2% after Monday’s 1.4% drop, the biggest in four months, and Hong Kong’s Hang Seng Index is 1.2% higher. Australia and New Zealand are closed for the Anzac Day holiday.

Oil prices recover after six-session drop

Oil futures prices are edging higher today after dropping in six previous sessions. Market sentiment is bearish with Brent down 10% since late 2016 as global oversupply lasts despite the Organization of the Petroleum Exporting Countries (OPEC) and major producers’ agreement to cut output by 1.8 million barrels per day in the first half of 2017. Russia said on Monday that its oil output could climb to the highest rate in 30 years if OPEC and non-OPEC producers do not extend a supply reduction deal beyond June 30. June Brent crude fell 0.7% to settle at $51.60 a barrel on Monday on London’s ICE Futures exchange.