European Stocks and Bonds Pause Selloff as Le Pen Assures Respect for Political Institutions

European markets saw a brief respite on Monday as far-right leader Marine le Pen assured investors that she would respect political institutions if she wins the upcoming snap parliamentary election in France. This news led to a bounce in the Paris market, which had experienced a significant drop last week.

The Stoxx 600 was little changed, and US equity futures were mixed, with some dipping and others slightly higher. Le Pen’s statement that she won’t push out President Emmanuel Macron if she wins the election was seen as an appeal to moderates and investors. Her group, the National Rally, is on track to become the biggest party in the lower house.

According to Frédérique Carrier, head of investment strategy at RBC Wealth Management, populist politicians often move closer to the center once they reach power, which seems to be the case with Le Pen’s latest comments. This shift towards moderation may encourage the market and ease some concerns.

However, sentiment remains fragile as Citigroup analysts warned of the risk factors associated with a potential far-right majority in France. Additionally, a coalition of left-wing parties in France has presented a manifesto to dismantle most of Macron’s economic reforms.

Looking ahead, markets are keeping an eye on central bank meetings this week, including the Bank of England’s meeting on Thursday. The Bank of England could signal a delay in easing policy due to the upcoming election and lingering price pressures. Other central banks, such as those in Australia and Norway, also seem hesitant to cut rates at this time.

Overall, the markets are cautiously optimistic following Le Pen’s reassurances, but uncertainties remain as investors await further developments in the political landscape.