While some were worried about an "unexpected outcome" from yesterday's Dutch general election, in the end the country's center-right Prime Minister Mark Rutte managed to fight off the challenge of anti-Islam, anti-EU rival Geert Wilders to score an election victory that was hailed across Europe on Thursday by governments facing a rising wave of nationalism.
Rutte received congratulations from European leaders including German Chancellor Angela Merkel, who faces a strong Social Democrat challenge in a September election and has shed some support to an anti-immigration party, Alternative for Germany, which is set to enter the federal parliament for the first time. Merkel told Rutte: "I look forward to continuing our good cooperation as friends, neighbors, Europeans," her spokesman said. While Rutte won fewer seats than in the last parliament, he still declared it an "evening in which the Netherlands, after Brexit, after the American elections, said 'stop' to the wrong kind of populism."
The vote result was a disappointment for Wilders, who had led in opinion polls until late in the campaign and had hoped to pull off an anti-establishment triumph in the first of three key elections in the European Union this year.
The market reaction reflected that accordingly, with the euro climbing to highest in more than a month, the Euro Stoxx 600 index up 0.7% at 377.6, DAX just shy of all time highs, and the France-Germany 10-year bond yield spread sliding as low as 59 bps. Furthermore, as noted earlier, the Le Pen win probability implied from betting odds fell to 29% following the election outcome:
The result was also a major relief to Wall Street analyst, as demonstrated by the following excerpts
Olaf Van Den Heuvel, chief investment strategist at Aegon Asset Management, in an interview on Bloomberg TV
- “It’s a good outcome for the Netherlands, it’s a good outcome for Europe. It’s a victory for the economy. I think in the end that shifted the election result.”
- Says French elections “may still haunt” due to higher unemployment, weaker economy; Aegon likely to remain “relatively cautious” in positioning across Europe
Bruno Colmant, head of macro research at Degroof Petercam, by phone
- “This is very good news for the euro zone. The level of market stress just dropped, and it sends a pretty strong message to foreign investors: you can now focus on the macro-economic indicators.”
- Says should pave the way for the ECB to slowly start to unwind quantitative easing and normalize policy, without having to cope with disruptive political events
Stephane Barbier de la Serre, strategist at Makor Capital Markets in Geneva, by phone
- Election results are supportive for European assets
- Shows that crucially, there is just no way Geert Wilder’s Freedom Party could enter some kind of coalition; however, Dutch political landscape more fragmented, possibly more than ever in its history which may complicate formation of a new coalition
- In terms of impact on French election: we could say results may sap Le Pen’s ambitions, but difficult to extrapolate trends between two very different countries: French GDP growth is currently more or less half the Dutch one while unemployment is twice as high
- Maintains conviction that Le Pen currently has no chance whatsoever to become the next French president
Stephane Ekolo, chief European strategist at Market Securities, by phone
- “It’s a big relief for markets, and this will prompt U.S. and U.K. investors to review their forecasts about the French presidential election. It’s positive for European assets, but without euphoria. It’s ‘back to business’ and we can focus on fundamentals and central banks again.”
Simon Wells, chief European economist, at HSBC, in note
- “We always viewed the Dutch election as sending a signal about a bigger European political event –- the French presidential election”
- Markets may interpret the Dutch result as an indication that the wave of populism sweeping across Europe is no longer rising
- “In this case, we also think it would restore some faith in political punditry and polling, since there would have been no big upset relative to the latest opinion polls”