Global markets soar as Macron leads in French election; CAC hits 9-year high; gold sinks 1%

French election

Global risk assets started the new commercialism week on a positive footing when centrist Emmanuel diacritic force within the highest range of votes among candidates within the 1st spherical of the French presidential election on Sunday.

The monetary unit listed to a five-month high long on Sunday as opinion poll results filtered in, with the eu currency jumping by one.35 p.c to shut at one.0873 versus the U.S. dollar, having listed higher than the one.09 handle earlier within the session before losing slightly steam. Early in Monday's session, the monetary unit had lost slightly any momentum and was commercialism around one.0868 by 10:50 a.m. London time. The monetary Times noted that the one currency's jump was its best daily leap in ten months. 1-month tacit volatility within the currency additionally sank by over a 3rd early Mon.

Equity markets in Asia caterpillar-tracked higher on Mon with Japan's Nikkei 225 index ending the session up by one.4 p.c and each Australia's ASX two hundred and Hong Kong's suspend Seng indexes in positive territory. Bucking the positive trend, China's Shanghai composite closed off by around one.4 percent, thought to be littered with fears over domestic regulators any toughening their stance towards speculative traders.

Also commercialism lower was refuge spot gold, around 1 percent lower by 10:50 a.m. London time at $1,272 per troy ounce. The precious metal is often used as a hedge in times of political uncertainty.

Meanwhile, by 10:50 a.m. London time, France's benchmark CAC 40 equity index was trading around 4.2 percent higher at a nine-year high, leading gains in the U.K.'s FTSE 100 and Germany's DAX index, up by around 1.8 percent and 2.8 percent respectively. The German index had hit a record high by mid-morning.

U.S. equity futures also reflected a higher expected open with the Dow Jones industrial average expected to soar by nearly 200 points.

This as the Stoxx 600 index of the largest listed European companies surged to its highest level since early December 2015 fifteen minutes after the market's open on Monday.

Nonetheless, the portfolio strategy research team at Goldman Sachs led by Peter Oppenheimer contended in a research note late on Sunday that equity markets had already largely priced in the first round outcome and they therefore did not expect a significant equity rally from here.

"As this has largely been the central expectation priced into the markets, we would expect any rally to be modest. French domestic stocks and the CAC 40 have not underperformed significantly as of late, and we do not expect them to rally materially following today's results, or after the second round of the election."

Centrist Emmanuel Macron of the independent En Marche party secured the lion's share of votes in Sunday's preliminary election at 23.7 percent, with the far-right's Marine Le Pen of France's National Front party trailing narrowly behind at 21.7 percent, according to Harris poll estimates. Separately, the French Interior ministry announced its final figures at 5 a.m. local time on Monday morning which showed that Emmanuel Macron had won 23.75 percent of the vote versus Le Pen's 21.53 percent. With tactical voting expected to dominate in the final round scheduled for Sunday May 7 and several political heavyweights, including incumbent French Prime Minister Bernard Cazeneuve and losing first round Republican candidate Francois Fillon throwing their support behind Macron, the 39-year-old former banker heads into the showdown as the favorite. Two separate polls from Ipsos/Sopra Steria and Harris released on Sunday anticipate Macron winning around three-fifths of the vote in the final.

A closely watched proxy of investors' fear levels in recent months has been the gap between safe-haven German government bond yields and those of their French counterparts. After a spike in the spread in recent weeks, the difference between the yields at the end of last week heading into the vote had retraced to the lower level of 59.30 basis points, down from this month's high of around 75 basis points in mid-April. By 10:50 a.m. London time on Monday the spread has pulled in as tight as 43 basis points.

However, the shrinking of the yield gap between the 10-year German bunds and French OATs of the same maturity probably will not run much further, according to Tim Graf, head of macro strategy EMEA at State Street Global Markets.

"I think there has to be some sort of premium to OATs retained," Graf told CNBC Monday. He noted that the tightest the spread had ever got was around 35 basis points and current levels were not too far removed from that with two weeks – in which a lot can happen – still remaining between now and the final round of the election.

This as analysts at J.P. Morgan Cazenove called German bunds overbought and said that yields from here should move higher, in a note published on Monday.

"French bond spreads vs Deutschland ought to slender, from three-year highs, as ought to the peripheral spreads to Bunds. Rising German yields and narrowing spreads square measure seemingly to assist equities, and financials particularly," foretold the analysts.