Despite Emmanuel Macron leading in the polls, investors have been told that if they get complacent a Marine Le Pen win would cause “profound” turmoil to the economy.
The French establishment has rallied behind Mr Macron with some polls show him leading by 62% to 38% after a shocking head-to-head television debate in which he described his rival as “stupid” and a “liar”.
Colin Cieszynski chief market analyst at CMC Markets in Canada points to chart history to offer an alternative view.
Mr Macron met Michael Bloomberg when he was France’s economy minister
Traders rushing to get back on the EU bandwagon, however, might want to recall that we saw a similar spike in UK markets a week before the Brexit vote last June
He said: “Traders appear to have taken the results and polls to suggest the second round as a mere formality and anointed Macron the winner.
“Because he doesn’t have a formal party behind him and would have to work with the traditional parties in the legislature to pass measures, the street has taken this as a victory for the EU, stability and the status quo.
“Traders rushing to get back on the EU bandwagon, however, might want to recall that we saw a similar spike in UK markets a week before the Brexit vote last June as traders got overconfident that Remain would win and we all saw how that ended.
Le Pen is not polling well but her EU stance might capture votes
“It’s not a good time to get complacent, however, as political risks have moved elsewhere, not gone away.”
Meanwhile Thomas Nilsson, of leading Nordic corporate bank SEB, says a Le Pen victory will have profound effects on the markets.
He said: “Polls indicate that centrist Emmanuel Macron’s victory in the second round is perceived as a done deal.
“While everything speaks for Macron, it may still be wise to analyse what would happen in case of Marine Le Pen’s victory.
“Le Pen’s ambition is for France to leave the Euro, which would in all likelihood mean the end of the currency and probably the entire Union in its current form.
“Although the Euro would survive in theory without France, in practise it would not work. A French switch to a significantly weaker Franc would make it virtually impossible for other southern European nations to continue to share a currency with a dominating Germany.
“The fact that the markets already think this is a done deal indicates that initial reactions if an upset where to happen would be profound.
“If Le Pen was to win, expect a sharp rise in interest rates between Germany and the GIP’s countries, a substantial Euro weakening, primarily against the Pound, Swiss Franc, Dollar and Yen.
“Major downturns on the stock markets both in and outside Europe should also be expected with banks hit the hardest. That the initial reactions would be small and quickly recovered as after Trumps victory is unlikely, and we rather expect reaction to be worse than after Brexit.
“But that is not the end of the story. If Macron stays clearly ahead of Le Pen in opinion polls, the focus will shift to the ‘third round of the presidential election’, the June parliamentary election.
“A French president is strong only if he or she has majority support in parliament, so political manoeuvring and deal making after that election will be vital to the new president.”
Mr Macron has been on the war path with his rival Marine Le Pen after she talked about allegations that he had an off-shore bank account which he has denied vigorously.
The 39-year-old also bungled his way through questions on his ‘Macronomics’ during this week’s final television debate, in which he told millions of viewers from around the world how he promised to set out on a path of global “conquest”.
However, he wrongly branded France as the fifth largest economy in the world, the position held by the United Kingdom.
In fact, France has slipped to the sixth largest economy of the world, with the United States holding the top spot ahead of China.