World stocks power to record high and euro jumps as French vote result sparks relief rally

Global stocks powered to a record high. Photo / Getty Images

World stocks surged to an all-time record high after centrist and market favourite Emmanuel Macron won the first round of the French election, igniting a risk-on rally.

Investors breathed a collective sigh of relief as markets quickly began to price in the prospect of a Macron presidency, who qualified for a May 7 runoff alongside far-right anti-EU candidate Marine Le Pen.

The MSCI All-Country World Index, a gauge of global stocks, jumped 1.5pc, surpassing its previous lifetime high set last month. France's blue chip index, the CAC 40, surged to its highest level in more than nine years, up 4.1pc on the day to 5,268.85. Meanwhile, the German DAX set a new record high of 12,454.98 and the Euro Stoxx 600 jumped 2.1pc to 386.09, a 20-month peak.

In the UK, the FTSE 100 enjoyed its biggest daily rise since September last year, rallying 150.13 points, or 2.11pc, to 7,264.68, while the mid-cap FTSE 250 index set a lifetime closing high of 19,602.83.

Worries about a potential anti-establishment shock had plagued market sentiment in the build up to the election. However, today polls showed pro-EU Macron is expected to beat Le Pen i the second round, easing fears of a breakup of the eurozone.

Credit Suisse analyst Andrew Garthwaite said Macron is "a good choice" for both the French economy and financial markets.

"Macron's policies are clearly pro-Europe, and as economy minister he implemented reasonable reforms to improve the competitiveness of French companies and liberalise the economy," he added.

On Wall Street, US stocks joined the relief rally, with the Nasdaq touching a new record high and the Dow Jones posting triple digit gains.

Banking stocks were among the biggest beneficiaries of the Macron first-round victory, which quelled concerns about a Le Pen win and a Frexit.

Neil Wilson, of ETX Capital, said: "Banks are doing well because there is now no major risk of significant outflows from the European banking system as investors no longer worry about the future of the euro."

The Euro Stoxx Bank index recorded its biggest one day gain in almost five years, rising 2pc. Barclays jumped 5.4pc, Standard Chartered leapt 4.8pc and Royal Bank of Scotland bounced 4pc.

Meanwhile, Europe's fear gauge, the Euro Stoxx 50 Volatility index fell 8.8 points, wiping out gains made earlier this month as investors fretted about the outcome of the first round vote.

Markets breath sigh of relief on French vote. 1-month euro volatility slides to 8.4% from 12.85% on Friday - the biggest fall on record. pic.twitter.com/ZJOtZIDIW7

— Jamie McGeever (@ReutersJamie) April 24, 2017

On currency markets, the euro popped by as much as 2.3pc against the US dollar to its highest level in almost six months of $1.0939, before retreating slightly in the afternoon to trade below $1.08. Meanwhile, the pound suffered its worst day against the euro since January, falling around 1.4pc to close just shy of 85p per euro.

Currency analyst Lee Hardman, of MUFG, said: "The market's focus will begin to shift away from political risk in Europe, and more onto the improving economic fundamentals which should begin to offer the euro more support going forward."

Election relief also spread to bond markets. French 10-year bond yields fell by over 10 basis points to more than three-month lows at 0.74pc, while the German-French 10-year bond yield, seen as a barometer of French election risks, tightened to around 40 basis points, down from around 62 basis points before the vote.