European markets reacted badly to president Emmanuel Macron’s call for a snap French election after far-right parties made major gains in the European elections held over the weekend.

Macron’s decision on Sunday to suspend parliament and force an election next month was triggered by the far-right RN (Rassemblement National) securing 31.4% of the vote in the European parliament vote compared with 14.6% for the French president’s centrist alliance party.

Stephane Sejourne, French foreign minister said: ‘I think it’s an election of clarification to lift the roadblocks.

‘Today the French electoral landscape shows 40% of those who voted chose a far-right list…yesterday’s result is a lightning bolt in political life, we must take that into account.’

Far-right parties also made gains in Italy, Austria and Germany as 360 million voters went to the polls to chose 730 MEPs.

The French CAC 40 benchmark fell over 2% when markets opened on Monday while the euro fell 0.4% against the dollar and 0.3% against sterling as investors digested the news from Europe.

The FTSE 100 index and the German DAX index also declined, although the German chancellor was quick to say he would be not following in Macron’s footsteps and calling a snap election.

The pan-European Stoxx 600 index was down 0.8% with banks, energy and motorway concession stocks leading the fallers.

Société Générale (GLE:EPA) fell over 7% to €24.10 and BNP Paribas (BNP:EPA) fell over 5% in morning trading.

Uncertainty over whether Macron will win the French election or hand victory to the right-wing RN party is likely to continue to weigh on French and European markets.

Investors sold off French government debt, with the yield on the benchmark 10-year OAT bond rising to 3.2%, on fears an RN victory would mean higher public spending.

Andrew Kenningham, chief Europe economist at Capital Economics, said: ‘The immediate concern for the economy is this could make it even more difficult for the government to bring down the fiscal deficit, which was 5.5% of GDP last year, so it makes sense that the spread on French over German government bonds has widened.

‘The government has repeatedly pledged to bring the deficit below 3% of GDP by 2027 but has not spelt out how it will do so. While there is potentially a concern about spreads within the currency union as a whole, those risks currently seem low.’ 

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