By Riva Gold and Alexander Osipovich
Global stock markets rallied after a centrist candidate won the
first round of France's presidential election, defusing some of the
political tension that had been weighing on share prices.
The Dow Jones Industrial Average rose 216.13 points, or 1.1%, to
20763.89. The S&P 500 jumped 25.46, or 1.1%, to 2374.15, while
the Nasdaq Composite climbed 73.30, or 1.2%, to 5983.82, a record
for the index.
All three indexes notched their biggest gains since March 1.
France's CAC-40 posted its largest one-day percentage jump in
nearly five years, and Germany's benchmark DAX index reached a
fresh high.
Other risky assets, like emerging-markets currencies and junk
bonds, also rallied.
"The market is enjoying a risk-on trade," said Quincy Krosby, a
market strategist for Prudential Financial.
Traders sold assets perceived as relatively safe, such as gold,
Japanese yen and government bonds. That reversed a trade that had
been gaining momentum for much of this year as political risks in
North Korea, the Middle East and France began to pile up.
The CBOE Volatility Index, or VIX, a measure of anticipated
stock-market volatility sometimes called the "fear gauge," dropped
26% -- its largest one-day fall since 2011.
French independent centrist Emmanuel Macron prevailed on Sunday,
winning the first round with nearly 24% of the vote. He will face
off on May 7 in the election's second round against National Front
leader Marine Le Pen, who has campaigned to take France out of the
euro and rattled global markets. 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 2.5%.
J.P. Morgan Chase & Co. increased $2.98, or 3.5%, to $87.50,
while Goldman Sachs added 6.36, or 2.9%, to 223.22. Combined, the
two added roughly 64 points to 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 futures for April delivery lost 0.9% to $1,275.80 an ounce,
the largest one-day decline for the precious metal 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 investors enthusiasm could be tempered by the looming
deadline to avoid a U.S. government shutdown and other policy
issues, analysts said.
President Donald Trump has ordered White House aides to speed up
work on drafting a tax plan, slashing the corporate rate to 15% and
prioritizing tax cuts over attempts to avoid increasing the
deficit, 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 17:47 ET (21:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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