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Financial markets are becoming cautious as polls show a tightening French presidential election ahead of the first round of voting scheduled for Sunday.
While French President Emmanuel Macron is expected to cruise into the final round, scheduled for April 24, polls show a narrowing lead.
One poll, conducted from April 4 to April 7 by Datapraxis and YouGov, showed Macron with just a two-point lead over his likely opponent, the far-right Marine Le Pen, in a head-to-head matchup. Other polls show Macron with larger leads of up to eight points.
In betting markets, Macron’s odds of winning a second term have dropped to 78% from as high as 93% in late March, according to Smarkets. “Over the last month, Le Pen has played a clever political game by campaigning on cost-of-living issues in France over other policies she champions, with Macron allowing himself to be outflanked on the topic,” said Patrick Flynn, political analyst at Smarkets.
Philippe Gudin, chief European economist at Barclays, say Macron’s pledge to increase the retirement age to 65 is one factor in his recent unpopularity, as well as the news about the nearly €900 million spent on consultancy firms by the French government. The top two finishers will hold a debate on April 21.
The French CAC 40
PX1,
has slightly underperformed European rivals over the last month, rising 9% against an 11% gain for the German DAX
DAX,
and a 12% rise for Italy’s FTSE MIB
I945,
The prospect of a Le Pen victory also has weighed on the euro
EURUSD,
in recent days, and French spreads have widened vs. German bond yields.
“If Macron underperforms his polls or Le Pen outperforms hers, that could deal another blow to the battered euro when markets reopen on Monday,” said Marios Hadjikyriacos, senior investment analyst at XM.
