French inject UK equities with va-va-voom

He set up his own political party just a year ago, but, incredibly, Emmanuel Macron is on the verge of being named president of France. The business-friendly social liberal is odds-on to beat anti-EU Marine Le Pen's Far Right party in a second round of elections, and equity markets love it.

Despite a crushing defeat for the established parties in another show of populist revolt both in Europe and the US, it was crucial for investors that Le Pen had as little chance as possible of winning the presidency.

With most losers now backing Macron and his En Marche! party, the chance of a potential shock here is even less likely than in the UK on 8 June, and most are confidence that France will remain very much in the EU next month.

To celebrate, the euro jumped to five-month highs, Germany's Dax hit a new record and the French Cac 40 hasn't been this good since early 2008. Over, here, the FTSE 100 is up almost 2%, at its best since Theresa May called a snap election last Tuesday, and the FTSE 250 rallied 1.3% to a record 19,621, underpinning our belief last week that there is still "value among mid-caps".

Relief that Le Pen will almost certainly lose to the strongest of the original candidates meant traders rediscovered their appetite for risk following last week's dive in London.

Boring utilities likes Centrica and Scottish & Southern Energy, and the gold plays – Randgold and Fresnillo – get the heave-ho in favour of firms with closest ties to Europe.

Headed by the Irish – Europe's largest paper and packaging firm Smurfitt Kappa, and building materials colossus CRH are up 6% and 5%, respectively.

In an important week for banks, Barclays and Standard Chartered are riding high ahead of quarterly results, with Lloyds Banking Group and Royal Bank of Scotland also gaining ground.

Travel stocks are breathing easier, too, led by British Airways-owner International Consolidated Airlines, Ryanair, easyJet, Thomas Cook and TUI, while GKN, the engineer which does over half its business in Europe for clients including Airbus, BMW and Volkswagen, makes an appearance among the top performers.

However, when Macron wins on 7 May, there'll be only the briefest of honeymoon periods before parliamentary elections a month later. With no natural political base in the national assembly, only then will we have a clear idea of how successful he'll really be.

If all goes to plan, France will be well-placed and the outlook for Europe and undervalued local equities will be greatly enhanced. Experience tells us not to rule anything out, although German elections later this year are less of a concern.

More immediately, Trump is back in play again after tweeting (mostly in capital letters) that he'll unveil a "Big TAX REFORM AND TAX REDUCTION" on Wednesday.

Given his failure to reform Obamacare first time round, he'd better deliver or risk a further dent to his credibility.

As we've said before, expect plenty of volatility near-term as markets react not only to the UK general election on 8 June, but also signs of an anticipated slowdown in growth here and inevitable acceleration in inflation accelerating. However, decent profit growth, generous dividends and sensible valuation multiples still make UK equities attractive longer term.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.