What's going on?

European markets have been closed for the four-day Easter weekend, but as investors return to their desks on Tuesday their focus will firmly be on the first round of the French election taking place this coming Sunday. (tweet this)

What does this mean?

The first round will likely just narrow the field down to two candidates, who will contest a second round on May 7th. Nevertheless, investors� sense of risk has been heightened by the four horse race that has emerged. Two of the leading four candidates are viewed as anti-establishment and likely to disrupt markets, partly due to their desire for France to stop using the euro (National Front leader Marie Le Pen is one of these candidates; the other being the �far left� leader).

Why should I care?

For the markets: The euro and French bonds are likely to be most affected by the result.

If France is governed by a leader that�s viewed as negative for markets, investors are likely to be less willing to own French government bonds. Also, if an anti-establishment candidate wins and pushes for France to leave the euro, it could lead to instability for the currency bloc as a whole.


The bigger picture: The market has got many of the near-term implications of recent votes wrong.

The Brexit vote was supposed to lead to a huge selloff in stocks, particularly in Britain, and a vote for Trump was supposed to do roughly the same thing in America. However, both countries saw their stock markets hit record highs soon after each of those elections. So there is skepticism around the consensus opinion. However, the Brexit vote, as predicted, has been very painful for the pound, so investors didn�t get it all wrong � and something similar could be in store for the euro (or, conversely, a win for one of the �establishment� candidates could buoy French investments and the euro).