French Shares Surge as Far-Right Takes Lead in Election

French far right leader Marine Le Pen reacts as she meets supporters and journalists after the release of projections based on the actual vote count in select constituencies , Sunday, June 30, 2024 in Henin-Beaumont, northern France.

French shares soared on Monday, with the Paris benchmark index briefly climbing 2.8% after the far-right National Rally took a commanding lead in the first round of legislative elections.

The CAC 40 in Paris eventually settled, showing a 1.6% gain at 7,594.08, while Germany's DAX saw a 0.5% rise to 18,320.36. In London, the FTSE 100 also increased by 0.5%, reaching 8,203.40.

The euro strengthened, reaching $1.0771 from $1.0744, driven by speculation that the National Rally could secure a majority in the lower house of Parliament. However, the overall outcome remains uncertain due to the complexity of the voting system.

Economists at ING Economics noted that the euro's gains likely reflect relief that the far-right parties did not outperform expectations. They cautioned, however, that the first-round results offer limited clarity on the parliament's future composition, with the second round next weekend posing a significant risk.

Asian Market Movements

In Asia, Japan's Nikkei 225 added 0.1% to 39,631.06 following a positive quarterly survey by the Bank of Japan. This survey indicated a modest rise in confidence among major manufacturers, despite the government downgrading its growth estimate for the first quarter to a -2.9% annual rate.

The dollar gained against the Japanese yen, trading at 161.04 yen early Monday, up from 160.80 yen on Friday.

China's Shanghai Composite rose 0.9% to 2,994.73 after a survey indicated that manufacturing conditions remained in contraction for a second month. However, the Caixin Manufacturing PMI showed slight improvement, rising to 51.8 in June from 51.7 in May, signaling expansion.

Hong Kong markets were closed for a holiday, while Australia's S&P/ASX 200 dropped 0.2% to 7,750.70. South Korea's Kospi edged up 0.2% to 2,804.31 following a private-sector survey showing robust factory activity.

U.S. Market Recap

On Friday, the S&P 500 closed 0.4% lower, the Nasdaq composite fell 0.7%, and the Dow Jones Industrial Average slipped 0.1%, though both the S&P 500 and Nasdaq remain near their all-time highs. The S&P 500 increased by 3.5% in June, up 14.5% this year, while the Nasdaq rose about 6% for the month, up 18.1% year-to-date.

Investors are hopeful that easing inflation, as indicated by a 2.6% rise in May's personal consumption expenditures index, will lead the Federal Reserve to reduce interest rates from their current 20-year highs.

Commodity and Currency Markets

U.S. benchmark crude prices rose by 45 cents to $81.99 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, climbed 43 cents to $85.43 per barrel.

As markets continue to react to political developments in Europe and economic indicators globally, the next round of legislative elections in France remains a key focus for investors.

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