Investors predict a hung parliament in France, after RN wins first-round vote

Good morning.

French stocks have jumped this morning and the euro climbed against the dollar as investors bet on Marine Le Pen’s far-right Rassemblement National party falling short of a majority, despite winning the largest share of the first round of yesterday’s election.

After unusually high turnout, the RN won 33.2 per cent of the vote, while the leftwing Nouveau Front Populaire alliance got 28 per cent. French President Emmanuel Macron’s Ensemble alliance trailed a distant third, with 22.4 per cent.

Though the RN is still predicted to win the most seats in the second-round run-off on July 7, its vote share was lower than many opinion polls predicted.

Investors are now anticipating a hung parliament, as pressure increases on centrist and left-wing candidates who finished third in their district to pull out of the race to avoid splitting the anti-RN vote.

• Reckless gamble: The snap election went spectacularly wrong, Europe Editor Ben Hall argues, as France reckons with potentially installing the far right in government for the first time since the Vichy regime.

• Europe’s ‘cordon sanitaire’: It is time to admit that ostracism of elected representatives to the right of traditional conservative parties can sometimes do more harm than good, writes Martin Sandbu.

Here’s what else I’m keeping tabs on today:

• US Supreme Court: The US Supreme Court is due to reach a decision on Donald Trump’s bid for criminal immunity to prosecution for having attempted to overturn the 2020 election.

• Companies: Tesla’s second-quarter sales are released and are largely expected to show a decline in deliveries, as the company grapples with tough competition in China.

• Central banks: The Bank of Mexico releases the results of a poll of private sector analysts, providing updated annual forecasts for growth, inflation, the exchange rate and the benchmark interest rate.

Five more top stories

1. A total of 72 per cent of Americans think Joe Biden should not seek a second term, according to a CBS News-YouGov poll released yesterday, up from 63 per cent in February. Though prominent Democrats have lined up to defend Biden since last week’s TV debate, anxieties are mounting among donors and voters about the party’s election prospects with him at the helm.

Thanks to all those readers who voted in Friday’s poll. An overwhelming majority (85 per cent) of you believe Biden should step aside and allow another Democratic candidate to run against Trump.

2. Almost 60 per cent of the growth in the S&P 500 index in the first half of 2024 was driven by just five “mega-cap” companies — Nvidia, Microsoft, Amazon, Meta and Apple — adding to concerns about market rallies being driven by growth at an increasingly narrow number of companies, after US stocks closed 14 per cent above where they started the year on Friday.

3. Exclusive: Israel is preparing to test an experimental model for running post-war Gaza by creating a series of “humanitarian bubbles” designed to be Hamas-free, which has been met with incredulity by many people briefed on the plans. The pilot scheme, soon to be launched in northern Gaza, is seen as a template for what Israel imagines would follow the war. Neri Zilber has more on the proposal.

4. Drug traffickers chose to launder money through Citigroup because they believed the bank was “more favourable”, with less robust fraud controls, according to senior US law enforcement officials. In an indictment unsealed last week, US prosecutors detailed how two California residents who allegedly worked with the notorious Sinaloa cartel deposited tens of thousands of dollars at Citi ATMs. Read more details of the case.

5. Exclusive: The US tried to facilitate a deal for Swiss trading house Mercuria to acquire copper-cobalt mines in the Democratic Republic of Congo in a transaction that hinged on Washington lifting sanctions against controversial Israeli billionaire Dan Gertler. The unusual US initiative reflects its increasingly fierce competition with China for access to the minerals needed for clean energy infrastructure.

The Big Read

The rise and fall of Evergrande’s bonds has shed light on the profound differences between mainland China’s financial, legal and political systems and those of the wider world. Almost three years after the troubled property group first missed payments to offshore investors, overseas bondholders are finding themselves stranded with little recourse when boom turns to bust.

We’re also reading . . . 

• Age of anxiety: Changing concerns and business models demand more sophisticated strategies for regionalisation and de-risking, writes Rana Foroohar.

• Eurocracy: Why are the UK and EU economies falling behind the US? Look at the role of government, argues Ruchir Sharma.

• Who’s who? Many of Donald Trump’s aides and associates have been to prison or are embroiled in court proceedings. Stefania Palma investigates.

Chart of the day

The FT editorial board has endorsed the UK’s Labour party, ahead of the general election on Thursday. The editorial chronicles the weak economic picture in the UK since the Conservatives took power, criticising the Tories for prioritising “management of its fractious party politics over sound governing of Britain”.

Take a break from the news

Quick-fire decision making is the new superpower in a world of infinite choices, HTSI editor Jo Ellison argues. In today’s soundbite, social media culture, there is no time for contemplation — here’s why we should have no patience for the “take-a-minutes” and “sleep-on-it” types of the world.

Additional contributions from Benjamin Wilhelm and Irwin Cruz