Macronomics part deux: French stocks jump on Emmanuel Macron's big majority

Investors across Europe greeted the victory of a massive parliamentary majority for the party of Emmanuel Macron with delight, buying up European stocks on Monday morning.

France’s blue-chip Cac 40 index rose by more than one per cent in the first hour and a half of trading, with 38 of its 40 constituents gaining ground at the time of writing.

The new French President’s party, La Republique en Marche (LREM), won 308 seats in the 577-seat National Assembly, while their allies in the Modem party gained 42 seats, giving a commanding majority for reforms.

The majority was smaller than expected after the first round on 11 June, with a high abstention rate of 57 per cent. First-round projection had indicated LREM would win more than 400 seats, but the result still leaves little in the way of Macron’s efforts to change the structure of French employment.

Chris Scicluna, head of economic research at Daiwa Capital Markets, said: “While Macron didn’t fare quite as well as last week’s projections suggested, the parliament seems highly likely to grant him the special powers required to allow him to drive through his labour market reforms by decree, perhaps by the end of the summer.”

The centre-right Republican party will be the main parliamentary opposition, with 113 seats, while the Socialist party saw its vote share wiped out, retaining only 29 seats overall.

The result comes barely a year after Macron founded the party. His political career began as a minister in the Socialist party under his predecessor as President, Francois Hollande, but he had never before held elected office.

Macron was seen as an outsider at the start of the year, but fortune and a slick campaign helped to propel the centrist candidate to the presidency. He surged into contention in January after Republican Presidential candidate Francois Fillon was tripped up by allegations he gave his wife and sons salaries for jobs which were never carried out.

Gains in the euro were limited overnight, with currency markets already having priced in Macron’s strong position. Against the pound and the US dollar the euro fell in morning trading.

Meanwhile the spread between yields on German and French government bonds tightened slightly to hover around the levels hit last week. Previously the yield spread, a measure of the premium investors demand for the perceived higher-risk French debt, had tightened to levels not seen since November as investors welcomed Macron’s majority.

Germany’s Dax index also gained from the positive mood, also rising by one per cent overall.

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