Europe close: Investors head confidently into French elections, analysts wary

Investors appeared to throw caution to the wind heading into Sunday's French presidential elections amid polls showing centrist-reformist candidate Emmanuele Macron had managed to widen his lead over far-right rival Marine Le Pen to 24 percentage points.

At the close in London, the benchmark Stoxx 600 was higher by 0.65% to 394.54, alongside a gain of 0.55% in the German Dax to 12,716.89 with the FTSE Mibtel jumping 1.48% to 21,483.86.

The four most recent polls showed Macron ahead by 62% to 38%, nonetheless at least a couple of analysts recommended clients remain mindful of the risks.

So, has a Macron win been fully priced-in? asked Neil Wilson, senior market analyst at ETX Capital.

"Can Le Pen do it? As noted, it’s unlikely with the polling looking decidedly in favour of Macron. But if Brexit and Trump teaches investors anything it’s not to get too complacent. Indeed the overhang of these results has probably kept euro bulls in check a touch. So the risk of a Le Pen victory, while small, is significant in that it would spark a big selloff in risk assets.

"We might expect the euro to shed 5% and maybe even achieve parity with the dollar, while French stocks, having been bought up to the gunnels of late, might tank as much as 10%," he said.

Speaking of the euro, it ended the day 0.04% higher at 1.0986 following somewhat more hawkish comments from ECB chief economist Peter Praet the day before. The risk premium on France's sovereign debt, measured against bunds, was down by two basis points on the day at 43 basis points.

A better-than expected reading on the April US jobs report buoyed sentiment too.

US non-farm payrolls rose by 211,000 in April (consensus: 193,000), following March's weak reading of 79,000, as average hourly earnings increased 0.3% month-on-month, as expected.

To take note of, news overnight that the White House had managed to secure passage of its healthcare reform bill in the lower House of the US Congress, a possible prerequisite for any future tax reform plans helped sentiment as well - to an extent.

"Negative sentiment has perhaps been tempered by Trump claiming a small victory in getting his healthcare bill through the House of Representatives (just; tight vote). While this is a step towards tax reform and other stimulus, Senate approval is sure to prove tricky and could prove a bridge too far in terms of concrete legislative approval for the new President," said Mike van Dulken, Head of Research at Accendo Markets.

Acting as a backdrop, also overnight Brent crude oil futures extended their recent move lower, hitting a key level of technical support towards $46.64 per barrel on the ICE. Yet by the end of the day they had bounced back to trade at $49.12.

Analysts at VTB Capital attributed the move lower to remarks from Russian president Vladimir Putin's press secretary Dmitry Peskov that the Kremlin has yet to decide whether to extend the 30 November OPEC pact for a coordinated reduction in output.

"Yet, as is often the case, this seems to be the proverbial last straw. The relentless growth of US crude production, as well as signs that monetary tightening in China is starting to take toll on growth there, means that a simple extension of the 30 November production cuts is unlikely to be sufficient to keep the oil market in balance in 2H17," they said.

Back in all things Europe, Spanish industrial production shrank by 0.4% month-on-month in March (consensus: 0.3%), according to INE.

After the close of markets, ratings agency S&P reiterated its BBB- rating on Italy's long-term debt with a 'stable' outlook.

On the corporate front, France's Vivendi clinched an extension of the rights to broadcast Formula 1.

Germany's Heidelberger Drucksmachinen is down by 1.8% after reporting annual net profits of €36.0m.