The second round of the French elections where an electoral shock with the far-left New Popular Front securing the surprise outcome of being the largest group, Deutsche Bank analysts note.

Markets brace for the politicsl situation in France

“The main story this morning is obviously the second round of the French elections where yet another electoral shock has been served up in 2024 with the far-left New Popular Front securing the surprise outcome of being the largest group. They are in line to win 182 seats. The far-right RN party and allies has claimed 143 seats. Macron’s ENS movement are looking set for 163 seats.”

“The NPF have the most fiscally aggressive program in terms of both spending and taxation and the market will be suspicious that the prospect of them being in government now or later will bring higher deficits with the associated concerns about debt sustainability and tense relations with Europe. They were talking about wealth taxes and increases on taxes on corporates which won’t be market friendly.”

“So far this morning the Euro (-0.01%) is only trading fractionally lower at 1.0835 against the US Dollar while European equity futures tied to the STOXX 50 (+0.32%) are edging higher as I type. OAT futures are lower but well within the trading range from Friday.”