San Francisco Frontiers - Paris stocks rally, euro climbs tracking French election

The far-right National Rally (NR) party of Marine Le Pen won a resounding victory in the first round of the polls Sunday, with President Emmanuel Macron's centrists trailing in third behind a left-wing coalition.

But the key suspense ahead of the second round on July 7 was whether the RN would win an absolute majority in the new National Assembly.

"The French election results have led to a sigh of relief from financial markets," noted Kathleen Brooks, research director at XTB trading group.

Macron and his allies have begun a week of intense campaigning ahead of the second round of legislative elections to prevent the NR from taking an absolute majority and control of government in a historic first.

A hung parliament could lead to months of political paralysis and chaos, according to analysts.

It could meanwhile "reduce the chance of a big spending splurge, but wouldn't exactly help sort France's fiscal position, which is already quite fragile", said Neil Wilson, chief market analyst at Finalto.

Approaching the half-way stage in European stocks trading Monday, the Paris CAC 40 index jumped 1.5 percent. It had opened up around 2.5 percent.

London rose modestly in midday deals as Britain gears up for its own general election on Thursday, with the main opposition Labour party on course to end 14 years of Conservative rule.

The Tories, led by Prime Minister Rishi Sunak, have trailed badly in polls throughout the UK election campaign.

The pound gained against the dollar, which took a knock from cooler US inflation data last Friday.

This has increased the chances of the Federal Reserve cutting interest rates this year.

"The door to a September cut is wide open," said Taylor Nugent at National Australia Bank.

He cautioned, however, that several releases on US inflation and jobs data before then could affect the outcome.

- Key figures around 1100 GMT -

Paris - CAC 40: UP 1.5 percent at 7,594.60 points

London - FTSE 100: UP 0.3 percent at 8,188.22

Frankfurt - DAX: UP 0.3 percent at 18,29586

EURO STOXX 50: UP 0.9 percent at 4,936.89

Tokyo - Nikkei 225: UP 0.1 percent at 39,631.06 (close)

Shanghai - Composite: UP 0.9 percent at 2,994.73 (close)

Hong Kong - Hang Seng Index: Closed for holiday

New York - Dow: DOWN 0.1 percent at 39,118.86 (close)

Euro/dollar: UP at $1.0755 from $1.0713 on Friday

Pound/dollar: UP at $1.2671 from $1.2644

Euro/pound: UP at 84.87 pence from 84.71 pence

Dollar/yen: UP at 161.10 yen from 160.92 yen

Brent North Sea Crude: UP 0.5 percent at $85.44 per barrel

West Texas Intermediate: UP 0.4 percent at $81.90 per barrel

J.Peterson--SFF