Markets retreated on Monday across Europe despite the resounding victory of Emmanuel Macron in the French presidential election.
While the euro rallied briefly to its highest point since November against the US dollar, above $1.102, it weakened to intraday lows of $1.0931.
France’s Cac 40 index lost 0.94 per cent at the time of writing, while the Stoxx Europe 600 lost 0.17 per cent.
However, investors in Greek debt welcomed the loss of the anti-euro, anti-EU Marine Le Pen in the presidential race. The yield on 10-year Greek government bonds fell by as much as 14 basis points as increased demand for bonds forced up their prices, which move inversely.
Meanwhile, the spread between German and Greek government debt, a measure of investor perceptions of political risk, closed further to reach its lowest point since the autumn of 2014.
Victory for the independent centrist over far-right rival Marine Le Pen had been widely predicted after the first round of voting a fortnight ago.
While the average polling error in the final round of the French election was actually greater than expected, Macron significantly outperformed against forecasts to win more than 66 per cent of the vote, according to France’s interior ministry.
Markets surged after the first round, with $290bn added to global markets as the possibility of an outcome which could threaten the EU diminished.
Read more: Macron rally sees markets gain $290bn
Some investors noted further rises in equity markets could be limited by the political obstacles facing Macron.
Ed Smith, asset allocation strategist at Rathbones, said: “With the presidential elections out of the way, attention will now turn to the National Assembly elections in June.
“The same two stage voting system should help the untested En Marche party again, but remember that Marine Le Pen’s party polled well in more rural towns and villages.”
Macron is currently the only elected representative of the En Marche party he founded. Polls suggest En Marche could win around 250 seats, short of a majority in the 577-seat French National Assembly.
However, the European economy has been showing signs of a sustained improvement in recent months. This narrative could take the lead with less of an obvious political risk on the horizon.
Luca Paolini, chief strategist at Pictet Asset Management, said: “Equities should build on recent gains as economic momentum remains robust and monetary conditions are favourable.
“Moreover, with Macron’s victory in France, stocks should also benefit from a more settled political climate.”