Global equity markets rallied yesterday, boosting a gauge of world stocks to a record high, while the euro briefly jumped to a five-month peak against the US dollar as the first round of an election in France went to the market’s preferred candidate.
Centrist Emmanuel Macron took a big step towards the French presidency on Sunday by winning the first round of voting and qualifying for a May 7 run-off alongside far-right leader Marine Le Pen.
The victory for the pro-European Union centrist Macron sent MSCI’s gauge of stock indexes across the globe to a record high of 453.38.
The blue chip euro zone STOXX 50 index surged four per cent and was headed for its best day in nearly two years, while France’s CAC40 climbed 4.2 per cent and was on track for its biggest daily percentage gain in five years.
Investors were concerned a victory for Ms Le Pen could eventually put France on the path taken by Britain to leave the European Union.
“The nice thing about putting a black swan, geopolitical disaster situation behind you is you can start focussing on fundamentals,” said Art Hogan, chief market strategist at Wunderlich Securities in New York.
“Coming into the weekend you had all that sort of risk off behaviour that gets unwound pretty quickly when the disaster is avoided.”
The Dow Jones Industrial Average rose 207.41 points, or 1.01 per cent, to 20,755.17, the S&P 500 gained 23.31 points, or 0.99 per cent, to 2,372 and the Nasdaq Composite added 63.84 points, or 1.08 per cent, to 5,974.37.
The pan-European FTSEurofirst 300 index rose 1.99 per cent and MSCI’s gauge of world stocks gained 1.43 per cent.
The euro pared earlier gains, but was still up more than one per cent against the dollar and more than two per cent up against the yen.
There was also an unwinding of safe-haven trades.
Shorter-term German bonds saw their biggest sell-off since the end of 2015 as investors piled back into French as well as Italian, Spanish, Portuguese and Greek debt.
Benchmark 10-year notes last fell 15/32 in price to yield 2.2874 per cent, from 2.236 per cent late on Friday.
The Japanese yen weakened 0.8 per cent versus the greenback at 109.97 per dollar. Wall Street’s so-called fear-gauge, the VIX volatility index, plunged the most since November.
Spot gold dropped 0.9 per cent to $1,272.03 an ounce. United States gold futures fell 1.21 per cent to $1,273.50 an ounce.
Oil prices continued to decline after last week’s sell-off, weighed by signs US production and inventory growth were offsetting Opec’s attempts to reduce a persisting global glut.
US crude fell 0.97 per cent to $49.14 per barrel and Brent was last at $51.54, down 0.81 per cent on the day.