LONDON (Reuters) -French President Emmanuel Macron on Sunday called a snap election after he was trounced in European elections by Marine Le Pen's far-right party.
Eurosceptic nationalists made the biggest gains in European Parliament elections in the Sunday vote while the Greens and liberals lost ground, an aggregated exit poll showed.
Financial markets could be set for a fresh bout of political uncertainty when they open in Europe.MARKET REACTION:
The euro fell 0.1% in early trading in Asia to $1.0790. It touched its lowest level in over a week, according to LSEG data.
COMMENTS:
MARCHEL ALEXANDROVICH, EUROPEAN ECONOMIST, SALTMARSH ECONOMICS, LONDON:
"The results of the elections are not a shock as the results mirrored the polls. But Macron’s reaction clearly is.
"He’s gambling that the voters’ opinions will change over the course of the next few weeks, or else Le Pen’s party will emerge as the main force in the French parliament."
HOLGER SCHMIEDING, CHIEF ECONOMIST, BERENBERG, LONDON:
"We could easily be heading for a period of cohabitation in which the President (Macron) is even further away from majority in parliament than he had so far. So, that is of course something which could mean that French politics does not move forward much."
"That is probably somewhat bad news for markets. It introduces an unexpected element of uncertainty." JAN VON GERICH, CHIEF MARKET ANALYST, NORDEA, HELSINKI:
"Obviously, the snap election is a new source of uncertainty, which should have some negative impact on economic and market confidence, at least in France."
"However, the results of the European Parliamentary elections do not always translate directly into the domestic parliamentary vote, due to a different election system and also often a bigger share of protest voting on the European election stage." PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK:“As far as markets are concerned, I don’t think it means much because most populists run on low taxes, and that’s a positive for the market."
“Sovereign debt being downgraded, this is not something the markets is overly concerned about until there’s an actual crisis."
“In terms of the euro, I don’t think the election will have much of a negative impact. From a fundamental perspective the euro’s weakness is due to the dollar’s strength.”
“We saw the ECB cut interest rates last week and this week the Fed is not going to cut interest rate. That’s going to create an even wider spread between the euro and the dollar.”
“If there’s a political shockwave, will that affect the euro? Most likely, but from a fundamental standpoint, a weak euro is an opportunity. It’s easier for them to export.”
“Fundamentally the only way the euro would substantially weaken is if there were a huge surge to the far right.”
(Compiled by Dhara Ranasinghe; Editing by Elisa Martinuzzi)
