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Investors Like The Polls That Show France's Marine Le Pen May Be Losing Election Momentum

Investors Like The Polls That Show France's Marine Le Pen May Be Losing Election Momentum
Investors are breathing a sigh of relief as recent and more and more estimates and surveys hint at the fact that Marine Le Pen's chances of becoming France’s next president may be slipping.
The far-right candidate's lead over centrist Emmanuel Macron declining to just 1.5 percentage points, showed a poll released Tuesday by French firm Ifop. Macron has been shown defeating Le Pen in the May 7 runoff election in another poll released by Opinionway.
In presidential contests, two rounds of voting is held in France. And bringing their yields closer in line with more steady German yields are the French bond prices which rose after the results of the polls were released.
The decline in the yield was narrowed and the spread between the French and the 10-year German sovereign yield narrowed down to around 0.68 percentage point as the French 10-year note yield declined to 0.888 percent. Bond yields move inversely to bond prices.
French debtholders were fearful that potentially the future of the EU itself would be threatened by a Le Pen victory which would lead to France leaving the European Union and hence they have been selling their bonds out such a fear. Noting its highest point since August 2012, the French-German spread rose last week.
By slightly outperforming the broader Stoxx 600 index, which was 0.23 percent higher, France's CAC 40 stock index climbed 0.28 percent on Tuesday.
The recent sell-off in French bonds may have gone too far, said John De Clue, chief investment officer of the Private Client Reserve at U.S. Bank.
"We are surprised with the market's concern over a Le Pen victory and how these spreads have widened," he said. "If this gets resolved, I'd say the market turns back to the fundamentals, which have been fairly positive."
According to IHS Markit, there was rise in the figures of job creation to a 9-1/2 year high in February and at that time, the pace of economic growth in the euro zone reached its highest level in almost six years.
But can polls be trusted?
Le Pen will ultimately lose, suggests the latest batch of polls. However in recent years as has been witnessed, political polling has been a terrible predictor of actual results. For example, shockwaves across financial markets were caused by the results of last year’s U.S. presidential election and Brexit vote and those results were diametrically opposite to what most of the polls had predicted.
"Over the last year, we've learned that anything can happen," said Minh Trang, senior FX trader at Silicon Valley Bank. "But there is a bit more confidence that things won't go awry and remain more stable."

Christopher J. Mitchell

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