Markets Leap on French Election Results
April 24 2017 - 4:36PM
Dow Jones News
By Riva Gold and Alexander Osipovich
Global markets rallied after results from the French
presidential elections rekindled investors' appetite for risk.
Investors bought stocks and sold assets perceived as relatively
safe such as gold and government bonds. The CBOE Volatility Index,
or VIX, a measure of anticipated stock-market volatility sometimes
called the "fear gauge," dropped 24%.
The moves put the Dow Jones Industrial Average on pace for its
best day since March 1. France's CAC-40 posted its largest one-day
jump in nearly seven years, and Germany's benchmark DAX index
reached a fresh high.
"The market is enjoying a risk-on trade," said Quincy Krosby, a
market strategist for Prudential Financial.
The Dow industrials rose 216 points, or 1.1%, to 20764 at 4 p.m.
ET. The S&P 500 jumped 1.1%, while the Nasdaq Composite climbed
1.2% to 5984, a record for the index.
French independent centrist Emmanuel Macron will face off in the
election's second round against National Front leader Marine Le
Pen, who has campaigned to take France out of the euro. Opinion
polls on Sunday suggested Mr. Macron would win a head-to-head
contest.
"It gives a lot of confidence to the market that we have a good
feel for the outlook in France and to a large extent puts to bed
the Frexit prospect," said Christopher Dyer, director of global
equity at Eaton Vance, noting the outcome should increase appetite
for borrowing and investment in Europe.
"European banks should be prime beneficiaries of policies that
are pro-growth, pro-stimulus and not protectionist in nature," he
said.
Bank shares rallied around the world. Banks in the Stoxx Europe
600 rose 4.8% and the KBW Nasdaq Bank Index of large U.S.
commercial lenders climbed 2.6%.
J.P. Morgan Chase & Co. increased 3.8%, and Goldman Sachs
added 3.2%, boosting the Dow industrials.
Government bonds sold off in the U.S., Germany, the U.K. and
Japan. The yield on the 10-year U.S. Treasury rose to 2.275% from
2.234% on Friday. Yields rise as bond prices fall.
Gold fell 0.9% to $1,275.80 an ounce, its largest one-day
decline since early March.
The euro was last up 1.3% at $1.0860 after touching a five-month
high on Sunday.
The French results came ahead of a busy week of earnings, with
companies such as Caterpillar, McDonald's, Microsoft, Amazon.com
and Exxon Mobil set to report their quarterly results.
A strong series of reports could give the U.S. stock market the
jolt it needs to break out of its recent trading range, said Philip
Blancato, president and chief executive of Ladenburg Thalmann Asset
Management.
"For it to go substantially higher, you need a good earnings
season," he said.
But risk sentiment is expected to be tempered somewhat by the
prospect of a looming deadline to avoid a U.S. government shutdown
and an uncertain policy mix, analysts said.
President Donald Trump has ordered White House aides to speed up
work on drafting a tax plan, prioritizing tax cuts over attempts to
avoid increasing the deficit and slashing the corporate rate to
15%, The Wall Street Journal reported Monday
Earlier, stocks in Asia mostly moved higher following the French
election result despite a drop in Shanghai-listed stocks. Japan's
Nikkei 225 index rose 1.4%, while Hong Kong's Hang Seng Index added
0.4%.
The Shanghai Composite Index fell 1.4% in its worst day this
year.
Write to Riva Gold at riva.gold@wsj.com and Alexander Osipovich
at alexander.osipovich@dowjones.com
(END) Dow Jones Newswires
April 24, 2017 16:21 ET (20:21 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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