So we’ve now had the results of the first round of the French parliamentary elections. The results look to us like they have come in roughly in line with the poll. So we’ve seen National Rally with 33 to 34 per cent of the vote, the New Popular Front with around 28 to 29 per cent of the vote, the Centrist Alliance probably 20 to 22 per cent of the vote.

Now what that means is that it is: a) unlikely that the really market unfriendly outcome of a better-than-expected showing from the left has been averted. And it also means that National Rally are unlikely, as suggested by the current share of vote, to attain a majority.

Those would have been the two most market unfriendly outcomes. So it is, at the moment, a small positive for French risk assets and we can see that reflected in how the euro and how French equities – and in particular French banks – are trading this morning (Monday 1 July 2024).

Two more subtle positives that we would raise: firstly, National Rally have actually toned down quite a lot of their rhetoric around policy in recent weeks. That is a positive if they end up, as looks likely, being a major part of the parliamentary power. The second thing is that, going into the second round of votes on the parliamentary election, Jean-Luc Mélenchon, the New Popular Front figurehead, has made it very clear that they will be withdrawing any candidates that are in third place in any particular constituency. So what that means is that it makes it, in theory, less likely that National Rally are able to gain the majority in the second round of voting, which again would be a negative outcome for French risk assets.

As I said, in the short term this is positive for those things that were badly impacted by the snap election being called by Macron in the first place. As a team, we generally cut French exposure initially when Macron called the snap election. And arguably today, with only a small bounce in French assets there could be some opportunities for stock picking going forward, so we’ll be having a close look at that.

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Risk assets: Financial securities that may be subject to significant price movements (ie. carrying a greater degree of risk). Examples include equities, commodities, property lower-quality bonds or some currencies.