Yesterday's first round of the French parliamentary elections gave the markets both answers and new questions. The most important message is that Marine Le Pen's far-right got the highest voter support (about 33%), but it is most likely that they will not be able to get an absolute majority.
The alliance of left-wing parties came in second, with about 28 percent. of votes. President Emmanuel Macron's pre-election "bet" failed – his party was supported by about 21 percent. voters who voted. However, for now the situation remains very unclear. In principle, the second round of the French parliamentary elections is very similar to the second round of the single-member constituencies of the Lithuanian Seimas elections. In each "district" 2 (or 3, if enough votes have been collected) candidates are elected, the candidate with the most votes wins in this round. It is this dynamic that creates uncertainty about the final results, as possible agreements on party support and individual constituencies can introduce more uncertainty.
Investors expected a worse election scenario. European stock futures are up around 1.2 percent this morning, with France's CAC 40 up as much as 2.8 percent and the euro up around 0.7 percent against the US dollar. The biggest fear was a complete victory for Marine Le Pen's party, and with it a possible large budget deficit. France already has one of the highest debt-to-GDP ratios in the European Union, second only to Greece and Italy.