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Nordic Morning Briefing: Macron, Le Pen Advance in French Poll

24 Apr 2017 3:23 am

By Razak Musah Baba
Nordic Macro 
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0900 German Ifo Business Climate 
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Centrist Emmanuel Macron and far-right politician Marine Le Pen led the first round of voting in France's presidential election as voters redrew the political map, placing the European Union at the center of a new political divide.

Mr. Macron won the first round with 23.5% of the vote, according an official tally of 90% of votes, ahead of Ms. Le Pen with 22.1%.

The vote marks a stunning rebuke of France's mainstream political forces. For more than four decades, a duopoly of conservative and socialist presidents has alternated in the Élysée Palace, squeezing out fringe parties as well as mavericks seeking to end the country's political and economic sclerosis.

On Sunday, the European Union and its demands of free trade and open borders became the defining fault line of a new political order. On one side stood Mr. Macron, a former investment banker who seeks deeper EU integration. On the other was Ms. Le Pen, an avowed opponent of the EU and its common currency.

"You have an alternative, the real one," said Ms. Le Pen on Sunday. "The major issue of this election is runaway globalization, which is putting our civilization in danger."

Mr. Macron said he wanted to become the standard-bearer of a governing majority that can relaunch the EU.

"I want to be the president of patriots against the threat of all the nationalists," he told his supporters.

Opinion polls published Sunday indicated Mr. Macron would handily defeat Ms. Le Pen in a head-to-head contest as supporters of defeated candidates coalesce around him. The second, decisive round of balloting is to be held on May 7.

A French exit from the eurozone would be unpopular among French voters and near-impossible for any future president to pull off, France's finance minister, Michel Sapin, said in an interview.

Speaking on the sidelines of a summit of global economic leaders, Mr. Sapin said the chances of "Frexit" are remote.

"In life everything is possible, even the most stupid things," the minister said. "But if there's one thing the French are attached to, it's the euro. I don't understand why some have tried to make this into a hobbyhorse."

Nevertheless, French authorities have undertaken precautions to protect against any fallout from Sunday's vote in financial markets, as any government would, the minister said.

European equity futures were higher Monday after Asian stocks staged a relief rally following Emmanuel Macron's victory. The results assuaged market fears of a win for Marine Le Pen, who has been considered a wild card for markets.

Ahead of Europe's open, DAX futures were up 162 points and FTSE 100 futures were up 30 points.

"We didn't think she would win, but we saw two big surprise endings last year," said Yusuke Sakai, senior trader at T&D Asset Management, referring to Donald Trump's election and the U.K.'s Brexit vote.

Japan's Nikkei Stock Average jumped 1.3% in early trading but gains elsewhere were more modest. Australia's S&P/ASX 200 rose 0.4% just after markets there opened and Hong Kong's Hang Seng was flat. S&P 500 futures, meanwhile, climbed 0.9%.

With the final vote between the two candidates set for May 7, many in the market see a Trump-style surprise result as unlikely in France.

"With Macron heavily favoured in head-to-head polling against Le Pen, it seems most likely that the negative market scenarios--priced in over recent weeks--will recede between now and the runoff," said Timothy Graf, head of macro strategy for Europe, the Middle East and Africa at State Street Global Markets.

Still, with earnings season in full swing, traders' attention is likely to be diverted some.

"A blockbuster week for U.S., and to a lesser extent European, corporate earnings will likely prove to be the ultimate arbiter of direction," said Marc Ostwald, a strategist at ADM Investor Services International.

The International Monetary Fund had a sobering message for Greece this weekend: Even if the country secures debt relief from its European creditors-a question that is by no means assured with bailout talks still deadlocked-the nation still needs even more painful economic overhauls than currently planned.

Seven years into an economic crisis and another near-term financial emergency looming, that is a message no Greek wants to hear and a key reason why the IMF is also urging Germany and Athens' other European creditors to give the country hope in the form of real debt relief.

The country's "fiscal and structural reforms...pension reforms, tax reforms, are only a down payment," said Poul Thomsen, IMF's European department chief and Greece's original bailout architect, on the sidelines of the fund's semiannual meeting of finance ministers and central bankers.

Germany's Ifo business climate survey is the highlight of Monday's economic calendar. The index for April is expected to show solid economic growth, Nordea Bank said.
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The Riksbank announces its rate decision on Thursday, with the central bank unlikely to extend its asset purchase program even though inflation remains low, said Danske Bank.

Danske said that an extension of QE would jeopardize the functionality of the Swedish government bond market by reducing its liquidity. The program, without being extended, will expire at end-June by when the Riksbank will own close to 40% of Swedish government bonds, Danske said.

If the Riksbank "does nothing", Danske sees a "significant" risk that the SEK will appreciate at a faster pace than forecast, adding pressure on imported inflation. To balance this risk, Danske expects the Riksbank to flatten the repo path by postponing the first hike by another quarter or two.
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OMXS30 1573.25 +0.29% 
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OMXC20 1087.39 -0.76% 
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Brent crude: $52.23 

Oil futures rebounded some to start the week in Asia after skidding 7% last week, but market players doubt bargain buying will be enough to hoist U.S. benchmark prices away from $50 a barrel near-term.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in June was recently up 0.4% at $49.83 a barrel in the Globex electronic session. June Brent crude on London's ICE Futures exchange gained 0.5% to $52.23.

Crude came under fresh pressure last week as U.S. production showed further growth and gasoline supplies surprisingly increased.

Meanwhile, more investors are now second guessing whether current production cuts by OPEC and Russia will ultimately be enough to sufficiently cut into global supplies amid the new gusher of U.S. oil. Data on Friday showed the number of active oil rigs in the U.S. has risen for 14th straight weeks to hit their highest level in more than a year.

Doubts are so pronounced that even with typical bullish factors like a weaker greenback and simmering geopolitical tensions, oil prices are only modestly higher on Monday, said Michael McCarthy of CMC Markets.

-Write to Razak Musah Baba at razak.baba@wsj.com; Twitter: @Raztweet

(END) Dow Jones Newswires

April 23, 2017 23:23 ET (03:23 GMT)

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