Download the Publication France’s bonds rallied, with the 10-year yield falling to its lowest level in three months, after centrist Emmanuel Macron and nationalist Marine Le Pen won the first round of France’s presidential election.

The yield spread between French 10-year bonds and benchmark German bunds tightened to its lowest since January. With Macron in the second round, investors’ worst-case scenario of a contest between the anti-euro Le Pen and the Communist-backed Jean-Luc Melenchon diminished. The euro also climbed to its strongest level in five months against the dollar before curbing some of its gains as the market’s shifted attention to U.S. tax cut reforms.

Macron, a first-time candidate and political independent, received 23.8 percent in Sunday’s election and National Front leader Le Pen had 21.5 percent, according to official results from the Interior Ministry. The result lowers risk and uncertainty for the euro zone after a year of polling surprises and political turmoil driving currency volatility, from the U.S. elections to Italian and British referendums.

Following Sunday’s results stock markets across Europe welcomed the outcome. Stoxx Europe 600 Index jumped 1.8 percent, the most since September, to the highest level since December 2015. France’s CAC 40 surged by 4.1 percent, while Germany’s DAX climbed 2.1 percent and the U.K.’s FTSE 100 increased 1.6 percent. Futures on the S&P 500 Index rose 1 percent.

Investors’ attention will now turn to the second round, for which Macron outperforms Le Pen in almost every opinion poll by a margin of some 20 percentage points.

Beyond the French elections, investors are monitoring carefully the following events:

• U.S. President Donald Trump announcement of his “big" tax reform and reduction plan on April 26.
• Attention returns to North Korea once again as the world waits to see if Kim Jong Un marks the 85th anniversary of the Korean People’s Army on Tuesday with another provocation.
• The earnings season is in full swing this week. Alphabet Inc., Microsoft Corp., Amazon.com Inc., Twitter Inc., Intel Corp., Credit Suisse Group AG, Barclays Plc, Bayer AG, Daimler AG and Total SA are among many major companies releasing earnings.
• The Bank of Japan is expected to maintain the settings on its monetary easing program unchanged at the end of the policy meeting on Thursday.
• The European Central Bank sets monetary policy on Thursday. The main focus will be on whether President Mario Draghi signals possible discussion for exiting the current extraordinary stimulus.
• U.S. GDP is to be announced at the end of the week. The economy is expected to have expanded at a 1.5 percent annualized rate for the first quarter, the weakest pace in almost a year.

 
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Source: Bloomberg