World stocks hit record highs on Tuesday, with investors’ relief at centrist Emmanuel Macron’s victory in the first round of the French presidential election supported by speculation about U.S. tax reform.
Safe-haven assets such as gold and the Japanese yen retreated as opinion polls suggested Macron would easily beat far-right, anti-EU candidate Marine Le Pen in a May 7 run-off.
The yield gap between French and German short-term government bonds, a closely watched measure of political risk in the euro zone, tightened further after hitting a three-month low on Monday DE2FR2=RR.
“This (the second round) is going to be a non-event for the market,” said Commerzbank currency strategist Thu Lan Nguyen in Frankfurt.
“Markets have pretty much priced out the risk of a Le Pen victory, and rightly so, because the first round of the elections has shown that the polls in France were correct…and this increases the confidence in the polls for the second round…It’s highly likely that (Macron) is going to win.”
European shares measured by the STOXX 600 index edged up by 0.2 percent, after rising 2.1 percent on Monday. French shares .FCHI pulled back 0.1 percent, having risen 4.1 percent on Monday in their biggest daily gain since August 2012.
Euro zone bank shares .SX7E edged higher after big gains on Monday. The European Central Bank said in a quarterly survey of lenders that while banks would tighten access to credit for companies in the second quarter, lending volumes were still expected to rise.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.6 percent, hovering near its highest level since June 2015 hit earlier in the session, on its fourth straight day of gains.
