Europe midday: Stocks mixed as French election rally loses steam

European stocks were mixed by midday as the rally in the wake of the first round of the French presidential election result lost steam, although France’s CAC made modest gains.

At midday, the Stoxx Europe 600 index was up 0.31% to 387.30, Germany’s DAX was flat at 12,451.01 and the CAC gained 0.27% to 5,283.26.

Meanwhile, Brent crude was up 0.34% to $51.78 per barrel and West Texas Intermediate rose 0.28% to $49.37.

Global markets rallied after centrist and europhile Emmanuel Macron went through to the second round and polls indicated that he will beat far-right eurosceptic rival Marine Le Pen to the Élysée on 7 May.

With less than two week to go to the final round of voting, Le Pen announced late on Monday that she has temporarily stepped down as leader of the Front National in a bid to re-brand and distance herself from the party to broaden her appeal.

Neil Wilson, senior market analyst at ETX Capital, said: “Global risks have dropped – the French election was a huge blot on the horizon for equity investors but is seems to be cleared - a Le Pen victory is possible but investors are giving her little to no chance. Her gamble to step away from the FN leadership to campaign as a unity candidate could pay off, but the arithmetic is still very much against her. A Macron misstep is still possible, but it’s his election to lose.”

After the result on Sunday, the euro had hit a five-month high against the dollar to 1.0873, but by Tuesday it had eased back, possibly taking a breather as investors look towards the the European Central Bank’s monetary decision and press conference on Thursday.

The euro was flat versus the dollar at 1.0876, unchanged against the pound at 0.84861 and up 0.66% versus the yen at 120.08.

Wilson said that the French election makes the ECB more likely to consider tapering and a rate hike, but the bank is unlikely to be in hurry as inflation remains disappointing, while ECB president Mario Draghi has said that political risk would have a material downside risk to the eurozone.

“Have these vanished? Well not entirely but you have to think Draghi is going to be minded to start sounding a tad more bullish. Tapering by September? It’s possible but the soggy inflation numbers just aren’t playing ball. It feels like we could be in for a good year of overly-optimistic taper talk ahead of each ECB meeting before we get anything like tightening”, he said.

The ECB’s quarterly bank lending survey revealed on Tuesday that some eurozone banks are set to tighten standards on loans to companies rather than ease them in the second quarter aided by low interest rates, although most are likely to keep them unchanged.

In corporate news, luxury fashion house Christian Dior climbed 11.92% on news that LVMH Moët Hennessy Louis Vuitton will buy the company’s couture business for €6bn. Louis Vuitton gained 4.19%.

Ericsson dropped 4.11% after the Swedish telecommunications equipment maker reported a 10.9bn kroner ($1.24bn) loss due to restructuring and write-down costs.