French election results catapult Wall Street higher; Nasdaq, global stocks set record
NEW YORK: U.S. stocks rallied on Monday, tracking a relief rally that swept through Asian and European markets, after centrist candidate and market favorite Emmanuel Macron won the first round of the French presidential election.
Pro-EU Macron is expected to beat right-wing rival Marine Le Pen in a deciding vote on May 7 according to polls, which were mostly right about the first-round results.
“This alleviates fears that we were going to have to navigate a French exit (from) the European Union,” said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.
“This is a classic relief rally showing up most in financials,” he said. “We cleared this hurdle and now it’s a little bit more clear running.”
European banks <.SX7E> jumped 7.4 percent while banks on the S&P 500 <.SPXBK> added 2.8 percent.
The moves across markets point to an unwinding of bets taken in the past few days when traders had turned defensive ahead of the French election.
The Dow Jones Industrial Average rose 216.13 points, or 1.05 percent, to 20,763.89, the S&P 500 gained 25.46 points, or 1.08 percent, to 2,374.15 and the Nasdaq Composite added 73.30 points, or 1.24 percent, to 5,983.82.
MSCI’s gauge of stocks across the globe gained 1.56 percent to 453.5 after touching a record high of 453.7.
U.S. investors are also gearing up for the busiest earnings week in at least a decade, with over 190 S&P 500 members, including heavyweights Alphabet
“Earnings are coming in better than expected and this is for a quarter where estimates were pretty tight. We didn’t see much pullback with estimates in the course of the quarter, so expectations were high and we’re beating them,” said Art Hogan, chief market strategist at Wunderlich Securities in New York.
Of the 100 S&P 500 companies that have reported results so far, 77 percent have beaten profit expectations, according to Thomson Reuters I/B/E/S. This has helped lift the blended profit growth estimates to 11 percent from 10 percent at the start of the earnings season.
Medical device maker C R Bard
Defensive trades suffered as traders embraced risk. Spot gold
Advancing issues outnumbered declining ones on the NYSE by a 2.47-to-1 ratio; on Nasdaq, a 2.61-to-1 ratio favored advancers.
The S&P 500 posted 72 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 191 new highs and 43 new lows.
About 6.8 billion shares changed hands in U.S. exchanges, above the 6.3 billion daily average over the last 20 sessions
Earlier in Europe Britain’s top share index jumped on Monday as banking stocks surged after centrist Emmanuel Macron came out on top in the first round of France’s presidential election.
The blue chip FTSE 100 <.FTSE> index closed 2.1 percent higher at to 7,246.68 points, its biggest one-day jump since early September 2016 and outpacing the mid caps <.FTMC> which closed up 1.3 percent at a new record closing level.
Macron won the first round of voting, qualifying for a run-off alongside protectionist, eurosceptic Marine Le Pen. Polls pointed to Macron easily beating Le Pen in the run-off on May 7, calming market fears in light of the UK’s Brexit vote and Donald’s Trump’s election in the United States.
“It’s the pro-growth backdrop that we’re now starting to see come through rather than … ongoing austerity which is providing quite a significant shift with the outlook for the European banks, in particular with the French banks very much leading the way, which of course sees their UK-listed counterparts rally quite significantly today as well,” Charles Hanover Investments partner, Dafydd Davies, said.
UK banks <.FTNMX8350> jumped 3.1 percent, joining in with a broader risk-on rally among European lenders <.SX7P>, which surged 4.8 percent. Shares in Barclays
Macron still needs to clinch the presidency and win a stable majority in legislative elections in June.
“The reforms Mr Macron is proposing are positive but the question is whether he will have the parliamentary legitimacy to implement these,” Barclays European economist, Francois Cabau, said.
“How much of it supports growth over the long term is still very much a question to which we won’t have the answer until the 18th of June, and potentially afterwards.”
Among individual stock movers, energy provider Centrica
Precious metals miner Randgold Resources
Blue chips aside, shares in Kennedy Wilson Europe Real Estate (KWE)
Small-cap shoe retailer Jimmy Choo
In Southeast Asias stock markets steadied on Monday with investors taking positions ahead of first-quarter economic growth numbers and as corporate earnings trickle in.
The focus on the French election has shifted from Sunday’s first-round victory for centrist Emmanuel Macron to the May 7 runoff with far-right National Front leader Marine Le Pen.
A Macron victory, seen largely as a more market-friendly outcome, is expected to take the uncertainty around the French exit, or ‘Frexit’, from the European Union off the table, as opposed to Le Pen’s staunch separatist stance on the issue.
A plunge in China stocks amid signs that Beijing would tolerate more market volatility as regulators clamp down on shadow banking and speculative trading, weighed on sentiment.
Risk aversion was further strengthened amid fears that North Korea could conduct another nuclear test as tension escalated in the region after South Korea said it may hold joint drills with
a U.S. aircraft strike group.
“I would say incidences in other countries may have some impact but it’s a combination of so many things rather than just one,” said April Lee-Tan, head of research at COL Financial Group.
Singapore and Philippine shares came off early lows to close marginally higher, as markets took heart from European stocks opening sharply higher on Macron’s lead in the first round.
Jardine Cycle & Carriage and Golden Agri-Resources rose 1.5 percent each, helping Singapore shares to close in positive territory.
The city-state’s headline consumer price index in March rose 0.7 percent from a year earlier, in line with economist expectations, and is unlikely to shift the central bank’s neutral policy stance.
Thai shares closed 0.3 percent lower. Thailand posted a trade surplus of $1.62 billion for March, missing a Reuters poll forecast of $1.72 billion, while customs-cleared exports surged well above expectations.
Charoen Pokphand Foods and Thai President Foods fell 3.7 percent each.
Vietnam shares declined for a third straight session, ending down 0.4 percent.
Indonesian and Malaysian markets were closed for local holidays.
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SOUTHEAST ASIAN STOCK MARKETS: CHANGE ON DAY
Market Current Previous Close Pct Move
Singapore 3144.03 3139.83 0.13
Bangkok 1564.66 1570.02 -0.34
Manila 7588.88 7578.16 0.14
Ho Chi Minh 709.39 712.41 -0.42
Change on year
Market Current End 2016 Pct Move
Singapore 3144.03 2880.76 9.14
Bangkok 1564.66 1542.94 1.41
Manila 7588.88 6840.64 10.9
Ho Chi Minh 709.39 664.87 6.7