Before the market ended last Friday, European equities opened lower and the euro struggled to sustain gains as the market assessed the turn of events inside the French elections. Although the majority of the market expected the victory of Centrist French presidential candidate Emmanuel Macron, the political tension served as a headwind in the euro zone.
Euro Stocks
In the mid of the Friday session, financial stocks posted declining figures in the European market. Leaders in the financial industry such as Commerzbank (DE:CBKG) and Deutsche Bank (DE:DBKGn) traded 0.15 and 0.64 percent lower. Even the French pioneered lender BNP Paribas (PA:BNPP) lost 0.53 percent.
The French bank industry is anticipated to get a boost in the victory of Macron due to his experience in the field. Banks like the BNP Paribas and Societe Generale (PA:SOGN) SA could finally increase consumer-banking revenue in France.
David Herro, chief investment officer of Harris Associates, noted in his previous statement that Macron:
Understands that free markets and capitalism are the way that wealth is created for your country (France).
Meanwhile, the German automotive manufacturing company Volkswagen (DE:VOWG_p) declined more than 1 percent to 141.95. Volkswagen AG Preference Shares faced a rough road prior to the second round of voting in France.
Energy stocks were also challenged with French Total SA (PA:TOTF) and Italy’s ENI (MI:ENI) losing 0.67 percent and 0.91 percent respectively. Other oil companies also had tumbling shares during the session.
Macron has been vocal in his intention to align diesel taxes with gasoline taxes during five-year presidential term in order to drastically reduce fine particulate pollution. He’s also firm in his stand of strengthening of European anti-pollution standards for new vehicles and checks in real conditions, after the infamous Volkswagen scandal.
European Currency
The market uncertainties and the series of monetary policy reports challenged the currency market. The euro, on one hand, received a major boost after Macron won the first round; however, the currency dwindled a little few days before the second round.
EUR/USD was losing around 0.25 percent in the mid Friday session. The pair had a session high of 1.09648 and a session low of 1.09547. In a wider perspective the pair was still in the loop of its pervious upward momentum.
Last April 21, the market was surprised how the euro reacted with the lead of Macron ahead of the first round of voting. The gains were sustained, but with minor fluctuations until the second round. This indicates positive impression that Macron has given in the European currency. Adding to this, the Federal Reserve decided to keep the monetary policy unchanged, thus, the greenback lacked support.
Known for his pro-European stance, Macron may provide some support in the euro considering the current state of its economy and the post effects of Brexit.