Centrist Emmanuel Macron's victory in the French election is a welcome, if unsurprising development for European markets. He gained nearly double the votes of Le Pen, with 66.1% compared to 33.9%. European investors can now put elevated fears over political uncertainty to rest in 2017.
The German elections in September carry no real threat against the EU; Merkel's key opponent Martin Schultz is an outspoken EU supporter. Italy has elections most likely in May 2018, but risks here are likely overplayed by investors today. Italy has a completely proportional system, and with the 5 Star Party currently polling 28% of the vote, the odds of a disruptive event are lower than many investors believe. The focus should now be on an event which dwarfs the French election in terms of economic significance; the ECB signalling to investors a tapering of QE.
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