French stocks leapt higher after the first round of voting in French elections placed the far-right National Rally (RN) in the lead, but not giving the party in as strong a position as polls had suggested.
The decisive second round of voting takes place next Sunday, July 7.
Results from the first round put RN, in tandem with allies from Les Republicains, on a 33.2% share of the initial votes, followed by the left-wing alliance New Popular Front (NFP) took 28.1%, leaving president Emmanuel Macron's centrist alliance Ensemble with 20%.
Other projections put RN on 34%, NFP at 29% and Ensemble at 22%.
Marine Le Pen, RN leader, said “the Macronist bloc has been all but wiped out” in reaction to the results, while potential future Prime Minister and RN leader Jordan Bardella said he aims "to be prime minister for all the French people, if the French give us their votes."
However, political and market analysts much less convinced, as the share of votes taken by RN was less than had been predicted by recent polls.
"A hung parliament remains the most likely outcome," said Holger Schmieding, chief economist at Berenberg.
"Whereas RN might possibly still win an absolute majority of seats in the second round, this now looks even slightly less likely than it did before."
On the Parish stock exchange the CAC-40 benchmark surged 2.3% higher to 7,650.
Hard to predict
It is "hard to predict the actual outcome", said analysts at Rabobank, "not least as an unusually high number of constituencies saw three candidates make it through to the second round", 315 out of 577 according to Le Parisien.
The prospect of three-way votes leaves Ensemble and NFP considering whether to step down in those jurisdictions in order to corral support in favour of a candidate that is likely to beat RN, the Rabobank team explained, with these decisions needing to be made by tomorrow.
"This 'cordon sanitaire' strategy could, however, backfire in so far as it is seen as an attempt to stifle the interests of a clearly increasingly large disaffected sector of French society," the analysts added. "A choice between far right and far left candidates, meanwhile, could simply see more centrist voters abstain."
But Deutsche Bank's Marc de-Muizon felt the chances of a RN government had marginally risen.
"The lack of a coherent clear and coordinated strategy to withdraw candidates across the centre-right to far-left parties is likely to shift slightly higher the distribution of RN final seat allocation.
"As a result, we view the probability of a RN government (minority or absolute majority) as having marginally increased relative to pre-round one."
Tuesday evening is expected to bring more clarity on seat projections, he said, with the final list of second round candidates from 6pm local time.
"After this, pollsters will know accurately the exact races and be able to predict more accurately the distribution of seats in the lower house ahead of the second round on 7 July."
Looking further ahead, Schmieding said the major concerns that linger are that spending, if not carefully planned, could trigger a financial crisis.
The risk of a financial crisis would rise, he said, if RN abandons plans of moderate spending or the left-wing alliance wins power and begins a campaign of "ambitious and expensive fiscal promises".