The risk of Le Pen’s victory suddenly came to the fore in the run-up to Sunday’s first round of voting, as opinion polls showed him gaining ground over President Emanuel Macron, although he still favors winning the second round on April 24. Shares of BNP Paribas, Société Générale and Crédit Agricole fell 4-6% in afternoon trading, while bonds were hit by rising political risk. The CAC 40 blue-chip index fell about 1.3 percent, yielding the largely stable Stoxx Europe 600 index. The gap between France’s 10-year borrowing costs and Germany’s borrowing costs – a market indicator for French debt risk – widened to 0.53 percentage points on Tuesday from 0.41 percentage points last Thursday, the largest gap since early stages of the Covid pandemic in April 2020. “These latest polls have worried the market,” said Peter Schaffrik, chief executive of RBC Capital Markets. “It’s not just the threat of lack of continuity. Lepen is a very different proposition. “People are afraid that after a recent demonstration of unity, this could open a new rift within the EU.” Le Pen’s campaign manifesto no longer includes the fall of the euro, as it did when it last faced Macron in 2017. However, it remains skeptical about free trade and open borders. Jérôme Legras, head of research at Axios Alternative Investments, expressed concern that the EU’s coordinated response to the Russian invasion of Ukraine could collapse, adding that banks tend to be a primary target for traders who want to bet against . “There are expectations for a harmonized European response that will try to alleviate the economic shock. . . “There is a fear that with Lepen you would not have the same level of coordination,” Legras said. “You would not necessarily have this macroeconomic stock that is important for the profitability of banks.” The war in Ukraine and Macron’s strong lead in opinion polls have so far overshadowed the campaign. Investors were much more explosive before the 2017 election, as they came after other upheavals, such as Britain’s vote to leave the EU and Donald Trump’s victory in the US. Le Pen’s platform focuses heavily on key issues of the far-right movement her father founded in the 1970s: including restricting immigration and boosting funding for police and prisons. On the economic front, he has repositioned the National Rally party to focus on working-class people worried about the cost of living. The rich would probably be hit under her property tax plan. Shares of Vinci and Eiffage, both French infrastructure companies, fell nearly 5 percent. would be affected by Le Pen’s promise to renationalize the national motorway system. “Suddenly we studied Le Pen’s plan for fiscal matters,” said a banker in Paris, adding that few people in business circles had been betting on anything other than Macron’s victory for weeks. That was still the central issue, the banker added, but the possibility of a Lepen victory had begun to ponder. “Financially it could be a disaster,” the banker said.
