French presidential elections

First TV debate buoys the markets

Relief that Macron managed to keep Le Pen in check. But volatility could soon return.

Macron appears to have come out on top of the first televised debate, according to opinion polls. Fillon and Le Pen were in joint second place, with left-of-centre candidates trailing in their wake.

Initial market reactions reflected relief that Macron was able to keep anti-euro Le Pen in check. The EUR strengthened, with EUR/USD approaching 1.08, the CAC 40 equity index touched 5030 points, and the yield spread on 10-year French government bonds over 10-year German government bonds fell below 65 bps.

“Policy positions remain potentially disruptive”

But this is just one debate. Election uncertainty will persist and is likely to keep financial markets prone to volatility. Policy positions remain potentially disruptive: In the debate, Marine Le Pen confirmed her anti-euro stance and expounded on her proposals to ban all immigration and impose a 35% tariff on certain imported goods.

We would stay cautious on French equities for now. There remains a significant chance of an election upset.

Stéphane Junod

Chief Investment Officer EMEA

Deutsche Bank Wealth Management

Source: Thomson Reuters Datastream, Deutsche Bank Wealth Management. Data as of March 22, 2017.