Europe’s main equity markets and the euro rebounded from initial losses on Monday as investors digested snap French elections in which a hung parliament appeared the likeliest outcome.
In France, the left emerged as the biggest group in a new parliament, beating out a resurgent far right in a vote called by President Emmanuel Macron three years ahead of schedule.
Macron’s centrist alliance obtained fewer seats in parliament but held up better than expected.
The outcome, in which no bloc has an outright majority, has left the country in a “thick fog” of uncertainty, according to one pollster.
Yet European equities advanced on relief that despite polls the far-right National Rally (RN) of Marine Le Pen had neither won a parliamentary majority nor was in a dominant position.
“European stocks have recovered from earlier losses as investors recover from the shock of the French election result,” City Index analyst Fiona Cincotta told AFP.
“Of course, there are concerns over a left-wing alliance, but this is a preferred result to a right-wing win that the market had been dreading.”
Ahead of the vote, investors voiced concern about high-spending pledges by the far right.
The left-wing New Popular Front and its allies won 187 seats in the 577-seat National Assembly, Macron’s centrist group won 159 seats and the National Rally and its allies won 142 seats, interior ministry figures show.
All three blocs fell far short of the 289 seats required for a clear majority.
Rabobank analyst Jane Foley sounded a note of caution regarding the impact on the French stock market.
“There is also speculation as to whether a politically fractured France and a weakened Macron means that France’s leadership position within the eurozone has been weakened,” she said.
She added that “France’s political and budgetary uncertainties” remain a negative factor for the euro.
Kathleen Brooks, head of research at XTB, said the left’s pledges not to push forward with macroeconomic reforms could exacerbate concerns.
“This is weighing on sentiment for now, however any downside could be limited as the horse trading around who will govern and how the government will be formed could take months,” she said.
Wall Street’s main indices advanced at the opening bell, with shares in Boeing rising by more than two percent after the aircraft manufacturer reached a deal with the US Department of Justice over two fatal 737 MAX crashes.
The plea deal, criticised by the families of the 346 people killed in the crashes, sees Boeing avoid a criminal trial, instead agreeing to a series of terms including another $243.6 million in fines.
In Asia on Monday, stock markets mostly sank with Hong Kong’s Hang Seng Index closing down more than 1.5 percent.
Tokyo’s Nikkei index seesawed in and out the red throughout the day before finally ending slightly down, while the broader Topix shed more than one percent after hitting a new high last week.
Taipei was a rare bright spot, posting solid gains on the back of a surge in shares of chipmaking giant TSMC, which added nearly three percent over the course of the day.
