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Quick take: Macron's win spells pro-business reforms, deeper European integration

Monday, May 8, 2017 - 11:03

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Emmanuel Macron, a 39-year-old former investment banker, was elected president of France on Sunday (May 7) defeating Marine Le Pen, a far-right nationalist who threatened to take France out of the European Union.

EMMANUEL Macron, a 39-year-old former investment banker, was elected president of France on Sunday (May 7) defeating Marine Le Pen, a far-right nationalist who threatened to take France out of the European Union.

Official Interior Ministry figures confirmed Mr Macron, who is not part of the mainstream left/right parties but comes with a business-friendly vision of European integration, has been elected president with 66.06 per cent of valid votes, while Ms Le Pen took 33.94 per cent.

 

 

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Market voices on:

 

Here are some economists' views:

BlackRock Investment Institute:

"We expect the focus to shift to French legislative elections in June. These will be crucial for determining Macron's ability to implement his economic programme, which includes labour market reforms that would make it easier for French businesses to hire and fire. We see scope for a mild risk-on reaction to the result, which looks mostly priced in after Macron clocked a first-round victory and polls consistently showed him ahead by a large margin.

"We are positive on European shares and see potential for renewed investor inflows as focus returns to the region's improving growth. European purchasing managers' indexes point to the strongest economic activity in six years. Europe stands to benefit from global reflation, and we see attractive valuations in cyclical shares. We are underweight European fixed income.

"He is committed to meeting the EU's 3 per cent deficit target, combining spending cuts with targeted investments and freeing up the labour market."

M&G Investments' multi-asset portfolio manager, Steven Andrew:

"This marks an important shift in the narrative around European politics: not all popular discontent in Europe can be channelled as anti-EU or purely nationalistic.

"Macron's victory is certainly good news for political supporters of the European project as his programme focusses on a deeper integration and better cooperation between the various countries in the Union. Furthermore, a strong believer in free trade and globalisation, the new French president will aim to benefit from those trends rather than fight to reverse them. This makes his victory all the more impressive, given that popular discontent has been interpreted as a rejection of both closer EU integration and of the merits of globalisation. His victory however is more about what has been rejected than it is about any distinct shift in the direction of French politics.

"Certainly, Macron has disrupted the bipartite status quo, with the adoption of a Blairite 'Third Way' style - at least in presentation. But we'll have to wait until the elections to the National Assembly in June to determine the extent to which this represents a tangible change in the direction of French economic policy.

"With that in mind, it might be wise to conclude that the result represents more a rejection of Le Pen's brand of nationalism than a whole-hearted endorsement of Macron's internationalism."

"From an investment standpoint...This suggests that Euro Area equities, currently attractively priced, could deliver substantial investment returns in the period ahead. A disruption to the 'euro-fragmentation' narrative should encourage investors to focus more on improving fundamental data across the region. On the fixed income side, the debt of peripheral sovereigns such as Portugal should benefit from a reduced fear of political instability."

Lombard Odier IM, Chief Investment Strategist, Salman Ahmed:

"En Marche! movement, came from outside the traditional French party system. For a change, this means a pro-business, pro-Europe, outward-looking and optimistic vision rather than the angry populism we have gotten used to recently.

"...a win for Macron allows investors to focus their attention back on Europe's fast-improving fundamentals, and this could consolidate the relief rally in risky assets. If anything, the risks lie in the Eurozone's recent set of strong core inflation data. This could be nothing more than a sharp rise in package-holiday prices, but it bears watching because much of the optimism around the European recovery depends upon the European Central Bank (ECB) maintaining its dovish stance.

"Macron is fortunate to be entering the Élysée Palace at a time when economic tailwinds can fix some problems regardless of policy. But these tailwinds will blow for months, not years. In any case, real progress needs to be made towards meeting the concerns of those left behind by globalisation, without jeopardising France's competitiveness.

"The populist tide may be turning for now, but the next five years may represent the last stand for the "globalist" worldview. If a new generation of centrists fail to deliver, the populists will return, fed by even stronger anger and resentment. Today is a time for relief - but there is no time for complacency from either politicians or investors."

AXA IM, Head of Research & Investment Strategy, Laurence Boone:

"As markets had to a large extent priced in Macron's victory, we expect a rally of moderate magnitude in the coming days. Next, markets will likely come back to the uncertainty of US tax reform and financial deregulation, the US cycle and the Federal Reverse's response in terms of monetary tightening, as well as European Central Bank next moves as the euro zone economy continues to recover more briskly (although we do not expect less quantitative easing or rate hikes before 2018).

"All these scenarios are positive for financial markets, favouring reforms to boost potential growth."

Manulife Asset Management:

"In the short-term, I believe it is likely to encourage investors to move into Europe. After all, the continent does boast a relatively attractive narrative - better valuations, positive earnings growth and economic momentum.

"In my view, political risk will remain around the western democracies until the wages and jobs situation improve. And this will translate into persistent uncertainty and volatility for the markets.

"We believe the outlook generally for the rest of this year should be reasonably positive for more 'value opportunities' versus the defensive and often expensive growth names.

"We continue to see value in energy, mining and financial companies - the more traditional value sections of the market. Companies we favor typically have healthy free cashflow yields and dividend yields that are higher than market levels."

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