Stockholders around the globe breathed a sigh of relief over how the first round of presidential election for France turned out. Emmanuel Jean-Michel Frédéric Macron won the round, beating euro skeptic candidates who could bring about a supposed 'Frexit'. Macron will now face National Front candidate Marine Le Pen in a two-person runoff election on May 7.
Macron's strong show in the first round helped French stocks gain traction, while European as well as U.S. equity markets cheered the development. In the view of this, investing in sound French stocks seems to be a prudent move for now.
French Stocks Finish Higher
The CAC 40 index jumped 4.1% to close at 5,268.85 on Apr 24, its highest one-day percentage gain since Aug 2012. The French benchmark also scaled its highest close since Apr 2015. In fact, the index was on track to reach a nine-year high, but settled for a little lower.
Bank stocks, predominantly, led the gains both in France and around the region. BNP Paribas SA BNPQY , the country's biggest lender rallied 8.55% to €67.32, while arch rivals Credit Agricole SA CRARY and Societe General SA SCGLY posted respective gains of 8.9% and 9.8%. The region-wide Stoxx 600 Europe Banks index hit a new 52-week high of 183.22 after climbing 4.4% in the opening two hours.
France ETF Sees Biggest One-day Pop Since 2012
The largest exchange traded fund that tracks the French equity market also surged on heavy volume after Macron posted a strong performance in the first round of the country's presidential election. The iShares MSCI France ETF rose 5.4%, its highest one-day uptick since Aug 2012. Thanks to the upward movement, the ETF catapulted to its highest level since Jun 2015.
About 340,000 shares were traded in the first few minutes of trading, thereby, helping the fund easily eclipse its 30-day average volume of 1.2 million. Investors have been concerned about the election results lately, as the ETF saw outflows of $57.4 million on Apr 21, the largest one-day redemption for the fund since Dec 2013.
French Election: Macron Wins First Round, 'Frexit' Fears Ebb
Investors feared the popularity of anti-European Union (EU) candidate Marine Le Pen as well as euro skeptic Jean-Luc Melenchon. Victory for one the candidates might lead to a move to withdraw France from the EU. We all know what happened to France after the U.K. opted to exit the EU last year. It sparked short-term volatility in France's equity market, but, a 'Frexit' is expected to have far greater implications.
The overall market, however, rallied after early polls showed that Macron - a 39-year old former investment banker - had maintained a 20-point lead over its far-right competitor Marine Le Pen. Macron secured a 23.75% vote, while Le Pen the daughter of Jean-Marie Le Pen, who had run for President in 1995, won 21.53% of the vote. Both of them will face each other again in a run-off on May 7.
Macron had made it clear that he wants to keep France in EU, while Le Pen has committed to put a referendum in which the public will decide to leave or stay in EU, raising the spectre of a 'Frexit'. The euro, in the meantime, bolstered on optimism that the EU will not break up.
In fact, there are early indications that several of the other candidates will urge their voters to support Macron in the final round, while conservative candidate Francois Fillon vowed to ask his supporters to vote for Macron. Fillion was eliminated in the first round after he secured 19.9% of the vote.
4 French Stocks to Bet On
Shares celebrated the prospects of Macron becoming France's next president and the ebbing of 'Frexit' fears across Europe and the U.S. France's stock market, in the meanwhile, hit a record high in election relief rally, which calls for investing in some solid stocks from the said nation. We have, thus, selected five French stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Ipsen S.A.IPSEY operates as a pharmaceutical company worldwide. The company was founded in 1929 and is headquartered in Boulogne-Billancourt, France. Ipsen has a Zacks Rank #1. The Zacks Consensus Estimate for its current year earnings rose 17% over the last 60 days.
The company is likely to return 25% this year, way higher than the Medical - Drugs industry's estimated gain of 6.4%. Ipsen outperformed the broader industry in the last three months (+33.47% vs +2.38%).
AXA SAAXAHY provides insurance and asset management services worldwide. The company was founded in 1852 and is headquartered in Paris, France. AXA has a Zacks Rank #2. The Zacks Consensus Estimate for its current year earnings increased 0.4% over the last 60 days.
The company is likely to return 7.5% this year, higher than the Insurance - Multi line industry's estimated gain of 6.6%. AXA outperformed the broader industry in the last three months (+9.41% vs -3.69%).
Arkema S.A.ARKAY produces and sells chemical products worldwide. The company was incorporated in 2003 and is headquartered in Colombes, France. Arkema has a Zacks Rank #1. The Zacks Consensus Estimate for its current year earnings advanced 4.2% over the last 60 days.
The company is likely to return 20.2% this year, more than the Chemical - Diversified industry's estimated gain of 7.7%. Arkema outperformed the broader industry in the last three months (+3.06% vs -0.23%). You can see the complete list of today's Zacks #1 Rank stocks here.
Societe Generale Group provides financial services in Europe and internationally. The company was founded in 1864 and is based in Paris, France. Societe Generale has a Zacks Rank #2. The Zacks Consensus Estimate for its current year earnings increased 2.1% over the last 60 days.
The company, which is part of the Banks - Foreign industry, is likely to give a stable return of 2.1% this year. Societe Generale outperformed the broader industry in the last three months (+9.29% vs -2.57%).
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