Investors too confused by French election to panic — yet

Financial markets went into France's Sunday election bracing for a good old-fashioned freakout — but the results from the first round of voting were too confusing to trigger a selloff. On Sunday, as expected, the hard-right National Rally of Marine Le Pen and Jordan Bardella emerged as the strongest force from the first of two rounds of voting, gaining some 34 percent of the nationwide vote.

“Foreign policy will create lots of problems,” from nominating a new EU Commission in Brussels to continuing to fund Ukraine, Steinbach said in emailed comments. “In return, Macron will delay RN projects, will not countersign laws or call the Constitutional Council. Government action will be paralyzed.”

Schmieding noted that a gridlocked government could find itself attacked from both sides by the NFP and RN. While they may be “polar opposites” on issues such as immigration and culture, they have both opposed Macron’s pro-growth reforms and could unite tactically on issues like pension reform and energy subsidies to unpick the work of the last government.

“In the extreme, if high debt cripples the credibility of fiscal policy or the creditworthiness of the sovereign, it can hamstring monetary policy: a tightening would simply heighten those concerns and fuel inflation, typically through an uncontrolled exchange rate depreciation,” the Bank for International Settlements warned in its Annual Economic Report, released on Sunday.

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