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European equities are on a roll after the French presidential debate.

Both the Eurostoxx 50 – which compiles Europe’s largest companies – and the wider Eurostoxx 600 have hit their highest level since December 2015 today, rising 0.6 per cent to 3,458.53 and 0.2 per cent to 378.53 respectively.

European banks led the charge, as jitters over the outcome of the French presidential election faded on Tuesday after a strong performance from centrist Emmanuel Macron in a televised debate on Monday night.

The prospect of far-right candidate Marine Le Pen, who plans to withdraw from the single currency, becoming president has caused concerns over the fallout on French bank deposits and knock-on effects on the wider European banking industry.

The Eurostoxx Bank index was up more than 2 per cent at 127.64, its strongest level since January 2016.

A note from Pimco on Tuesday stated:

Recent polls as well as the outcome of the Dutch election last week suggest somewhat lower odds of success for nationalist, anti-European candidates and parties in the upcoming elections in France and Germany.

Overall, however, we remain cautious on Europe given the near-term political event risk and also our secular concerns about the viability of the euro in its present form, as redenomination risk – albeit very remote – has resurfaced in the eurozone.

The FTSE 100 was the exception to broader European equity strength on Tuesday as the pound strengthened after official figures showed UK inflation had risen above the Bank of England’s 2 per cent target, raising expectations of an interest rate hike. The index fell 0.3 per cent to 7410.

The FTSE 100 and the pound tend to be inversely correlated due to the high number proportion of multinational companies listed on the index, whose dollar earnings benefit from a weaker sterling.

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