Markets are celebrating the outcome of the first round of elections in France. The stock markets are running and the spread is cooling despite the fact that the polls confirmed the victory of Marine Le Pen's Rassemblement National which until last Friday was considered a bogeyman for the whole of Europe. So why this good mood? It's all about the percentages. The far-right party in fact obtained 33,1% of the votes. A lot, but not enough to reach an absolute majority in the National Assembly. In the meantime, the other political forces in the running - the left of the New Popular Front at 28% and the presidential majority at 20% - begin to organize the anti-Rn strategy in view of the ballot on July 7th. The scenarios, therefore, are still open, but for analysts and brokers it seems the "worst" danger has escaped, that is, an absolute majority for the Lepenist right or for the left of the New Popular Front. Translated: uncertainty about the formation of the new government is better for the markets than the certainty of the arrival of an extremist government. A consideration sufficient to make French assets rebound and also those of other countries considered more sensitive to the outcome of the vote.
European banks soar after the elections in France
In the front row are the banks, with the Stoxx 600 banks which gains 1,85% of its value after losing 3,7% overall since the European elections of 6-9 June. In recent days, analysts of AlphaValue they had indicated the banking sector as the most sensitive to the French vote, due to the feared effects of the Rassemblement National political program on a fiscal and public debt level with repercussions on rates and confidence. Today the same broker describes the result of the first round, talking about danger escaped. Analysts see sovereign risks (OAT rates and the cost of refinancing) and regulatory risks (tax interventions) decreasing, with consequences for the quality of banks' assets. And so, after the drops between -13% and -20% recorded by the main institutions in June on the stock market, AlphaValue sees space for a rebound this week resulting from the disappearance of the scenario considered to be the worst. SocGen, as the bank considered most exposed to the French economy, is considered by analysts to be the first beneficiary in the short term. And it is no coincidence that it is in Paris Société Générale recorded the best performance, gaining 4,6%. They follow Crédit Agricole (4,38%), BNP Paribas (3,4%). In turn, the purchases flowed into the banks of the old continent. In Frankfurt Commerzbank salt by 3,18%, Deutsche Bank by 2,56%, while in Madrid Banco Sabadell scores +1,8%.
Italian banks on the shields with Ps leading the way with an increase of 5,75%. Also running B for Bank (+ 4,77%) and Unicredit (+3,92%). Copious purchases on Bpm bank (+ 2,83%), Mediobanca (+ 2,74%), Intesa Sanpaolo (+ 2,68%), Pop Sondrio (+ 2,47%).
Stock market: Europe is driven by Paris and Milan
The performance of the banking sector galvanizes Paris, with the Cac 40 rising by 1,54%. But surprisingly it is Milan the best stock market in Europe with an increase of 1,62% to 33.691 points. Well tuned too Madrid (+1%), while Frankfurt (+0,32%) and above all Amsterdam (+0,07%) travel at the rear. Outside the EU, investors' eyes are focused on the performance of the FTSE 100 London (+0,3%) in view of another crucial vote for the old continent. In fact, on Thursday 4 July, while America will stop for Independence Day, the voters of the United Kingdom will be called to the polls for the early elections which according to the polls should establish a clear victory for Labour.
It should also be noted that European stock markets slipped from the session highs after the Manufacturing SMEs of the June eurozone, which showed a worsening of the contraction to 45.8 points and a much faster decline in demand even as factories cut prices. In Italy the manufacturing PMI index rose above expectations to 45,7 from 45,6 in May, while in France and Germany it fell respectively to 45,4 (from 46,4) and 43,5 (from 45,4, 2). Eurozone inflation for June is scheduled for Tuesday 5 July and the monthly US labor market report for Friday XNUMX July. In the meantime, the wait for the... Sintra Forum 2024 organized by the European Central Bank (ECB) which will open in the evening.
Poste, Iveco and Generali also go up in Milan
In addition to the rally of the banking sector in Milan, the race of Poste Italiane (+ 3%), Iveco (+ 2,58%) and Generali (+ 2,49%).
Earn 1,43% Telecom Italy on the day of closing of the sale of NetCo to Kkr participated by the Ministry of Economy.
Prysmian instead it leads the declines with a red of 1,45%. Weak too Amplifon (-0,96%) And Diasorin (-0,52%).
Outside the Ftse Mib is still in the running Fincantieri in the second week of the 400 million capital increase and the value of the combined securities is approaching +30% compared to the prices before the start of the recapitalization. The shares gain almost 4,19% to 4,72 euros and the option rights mark +8,75% to 1,92 euros.
Le Pen's half-way victory pushes spreads down
The outcome of the French vote also affects the spread, with the differential between the 150-year BTP and the German Bund falling to 157 basis points from 10 on Friday and that between the French Oat 10 and the German 69-year bond falling to 75 basis points from XNUMX at the previous closing.
For UBS, the spreads between French and German government bonds are expected to narrow slightly but will still remain high in view of the second round given that the market wants to understand which government will emerge from the polls and how it will behave with respect to European fiscal rules: the bank's analysts Switzerland have indicated 130 basis points as the ceiling of the differential in the case of a French government supported by an absolute majority in the National Assembly that rejects the new EU stability pact.
In this context, on the secondary market for government bonds the greater appetite for risk drives sales Waist Germans, with the ten-year bond returning to yield 2,56% from 2,44% on Friday. However, the yield on other securities remains substantially stable, with the Oat at 10 years at 3,25% and the BTP 10 to 4,06%
The other markets
On the currency market the euro strengthens against the dollar and reaches 1,075 from 1,071 on Friday, while among raw materials the price of the dollar continues to rise petrolium: Brent is at 85,4 dollars a barrel (+0,47%), WTI at 81,9 dollars (+0,44%). The price of the natural gas in Amsterdam which is close to 35 euros per megawatt hour.
