French Election nerves reflected in the market

#OPINIONLEADER#

The first round of the French Presidential elections will be held on Sunday 11th April. The market has woken up to the possibility of a Le Pen win.

French Presidential elections

The first round of the French Presidential elections will be held on Sunday 11th April. A candidate needs to win 50% of the votes in order to win straight out. This has never happened, and this year is unlikely to be the first. The second round is held on the 24th of April.

Heading into the election, President Macron is the favourite to win. However, the market has woken up to the prospect of a political shock and a win by far-right candidate Marine Le Pen. Macron faced Le Pen back in the 2017 election, where he won a landslide victory.

In 2017 Macron won by 66% to 34%. Today that difference is much tighter with one poll even pointing to a Le Pen win, but most are looking at 53%, 47%.

While back in 2017, Le Pen was focused on exiting the euro, this time around, she has rebranded herself to focus on economic problems. With consumer prices surging ever higher, there are certainly plenty of economic issues to be focusing on.

Le Pens’ policies are a big concern for the market with expectations for large-scale public borrowing, contravening the Eurozone’s budget rules and challenging the German-led consensus of fiscal stability.

Reflected in the market

Nerves in the market have started to show up this week. Firstly, the spread between the French and the German 10-year bonds, considered a proxy for political risk, has widened.