French election race tightens, 'worst case' Le Pen-Melenchon battle possible

France's presidential election race tightened with just five days to go before voting begins, with radical leftist Jean-Luc Mélenchon picking up support at the expense of far-right candidate Marine Le Pen.

Centrist Emmanuel Macron's lead increased, as opinion polls showed Mélenchon, whose policies include a 90% tax for salaries above €400,000 and an exit from Nato and the World Trade Organisation, climbed to an average of 19.4% in the polls, up from 18% in the middle of last week and around 12% early last month.

Le Pen slipped down to 22.3% from 23.5%, while Macron stabilised at 23.3% and scandal-hit centrist reformer Francois Fillon regained some support to climb to 19.4% from 18.8%, according to an average of the last polls of eight pollsters' results over the Easter weekend.

However with 30% of French voters still undecided, accurate predictive polling for the four major candidates was nearly impossible, with the gap between the quartet within the margin of error.

The first round of voting begins on 23 April to decide the two candidates who will face each other in a second round run-off on 7 May.

An Opinionway poll for the second round showed Macron had stretched his lead, with a potential match-up with Le Pen giving him a 64/36 victory, up from 62/38 last week; while if Fillon meets Le Pen the centrist was seen winning 60/40, up from 58/42 previously.

"For the second round, polls seem more clear cut. If he makes it into the run-off, Macron would likely win handsomely against any of his three potential opponents whereas Le Pen would probably lose against any of the other candidates," said economists at Berenberg, who compiled the averages.

If Melenchon and Fillon are level in the first-round polls, they said Melenchon was likely to prevail and ascribed a 10% risk that Melenchon and a 10% risk that Le Pen may win the French presidential elections.

Le Pen and Melenchon are both unhappy with the current terms of being in the European Union, with Le Pen calling for a 'Frexit' referendum and Melenchon pushing for re-negotiation of the current terms, or an exit if this cannot be achieved.

Said Berenberg's Holger Schmieding: "In both cases, France and Europe would be in for a period of trouble. However, both radical candidates would likely fail to gain the parliamentary support needed to take France out of the EU or the euro."

Although market-friendly candidate Macron remains well ahead of his three main rivals, Deutsche Bank strategist Jim Reid said investors were concerned that the independent will fail to make the second round run-off, with the worst case market scenario a Le Pen-Melenchon battle.

He predicted "a lot of noise" and elevated volatility this week, with the VSTOXX index closing last Thursday at 23.39, the highest level this year and also the highest level since early November.