The final round of the election on May 7 to determine France's next president will pit a centrist and market-friendly candidate Emmanuel Macron against the far-right's Marine Le Pen, who is anti-euro and against globalization.
Investors around the world had feared a worst-case outcome: a final vote between Le Pen and far-left candidate Jean-Luc Melenchon, which would have meant that a candidate in favor of France breaking free from the European Union would win.STORY FROM THE MOTLEY FOOL
Motley Fool issues third alert for this stockAfter that did not happen, investors moved back into stocks and pared back on assets like gold on Monday.
After the results from the weekend vote came in, a relief rally in stocks began in Asia, gained power in Europe and spread to Wall Street.
Investment pros reacted bullishly because Macron is viewed as business-friendly and campaigned on keeping France in the eurozone, a platform investors view more favorably. The upbeat market reaction suggests investors see Macron defeating Le Pen. Polls currently show Macron leading by a wide margin in the final round.
"We see this as a positive surprise," Richard Turnill, global chief investment strategist at BlackRock wrote in a post-election report. "This result should lead to a material reduction in the perceived political risk in Europe."
European stocks soared as the risks related to politics lessened and investors refocused on an improving European economy. The CAC 40 index in France rallied more than 4%, its biggest one-day advance since June 2012. German shares also jumped, with the DAX index rising 3.1%. European banks rose, with French bank BNP Paribas (BNP) gaining nearly 9% and Germany's Deutcshe Bank gaining more than 10%. The euro currency also rallied, rising 1.3% versus the dollar.
In Asia earlier Monday, the Nikkei 225 in Japan closed 1.4% higher.
In early trading on Wall Street, the Dow Jones industrial average was up 220 points, or 1.1%. The Standard & Poor's 500 stock index was 1.1% higher and the Nasdaq composite was up 1.2% — a record high.
So-called havens, like gold, retreated. Gold dropped by $17 per ounce, or 1.3%, to $1,272.60. And the price of the 10-year U.S Treasury fell, with the yield briefly rising above 3%.
Investor anxiety also was also in retreat. A closely watched Wall Street fear gauge, dubbed the VIX, declined nearly 20% in morning trading.
"Markets around the world are breathing a sigh of relief," says John Stoltzfus, chief investment strategist at Oppenheimer.
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