Markets look for shreds of optimism as French voters face ‘invidious’ choice

Today’s top stories

• The US Supreme Court said Donald Trump was immune from criminal prosecution for “official acts” as president but not for private actions, in a landmark legal decision.

• US law enforcement officials said drug traffickers chose to launder money through Citigroup because they believed the bank was “more favourable”, with less robust fraud controls.

• The FT revealed that the EU is set to charge Facebook’s parent Meta with breaking the bloc’s digital rules. It is taking issue with Meta’s “pay or consent” model, where Facebook and Instagram users can opt to use the social networks for free while consenting to data collection, or pay not to have their data shared.

For up-to-the-minute news updates, visit our live blog

Good evening.

“Better than feared” seems to be the view of financial markets after the political earthquake in France, which has brought the far-right Rassemblement National to the brink of power. President Emmanuel Macron’s “reckless gamble” of a snap election, however, has left voters facing an invidious choice in Sunday’s run-off vote, writes FT Europe editor Ben Hall.

Stocks and the euro rose as investors bet that the second round would deny the far right a majority in the National Assembly, while the euro also inched higher.

The RN came top in yesterday’s first round with 33.2 per cent, ahead of the leftwing New Popular Front on 28 per cent and Macron’s Ensemble alliance on 22.4 per cent. The RN’s opponents on the centre and the left have until tomorrow to decide whether to pull candidates from the run-offs and form a united front against Marine Le Pen’s party. The tradition of mainstream parties in France calling for a front against the far right at all costs has, however, already been shredded, with the conservative Les Républicains announcing that it would let its voters decide who to back in the run-offs. 

Developments are being keenly watched in Brussels, especially after far-right gains across the bloc in the recent European parliament elections,

There has already been speculation about what the European Central Bank might do if the government goes on a spending spree that leads to damaging clashes with the EU and financial markets over its rising debt. In particular, investors fear that a wider sell-off in French debt could spark contagion in other European countries, with national interest rates starting to diverge from each other.

An RN government could also have an important impact on EU trade, says Trade Secrets writer Alan Beattie. Other rightwing populists, such as Italy’s Giorgia Meloni, may have unsavoury views on immigrants, but have generally been keen on the internal market and external trade, he writes. Even if she has dropped some of her earlier views such as ditching the euro, Le Pen’s party would bring protectionism to France’s border with proposals to repatriate France’s EU budget contribution, limit immigration from inside the bloc and tear up public procurement rules. 

The “relief rally” in markets may also prove to be rose-tinted, says the FT Lex column (for Premium subscribers), which points out that a higher deficit through increased spending was likely even if the FN did not gain a majority. This would mean tighter financial conditions for French businesses at a time when interest rates are supposed to be falling. Macron’s unpopular reforms to public pensions are also at risk of being undone.

Chief foreign affairs commentator Gideon Rachman says the forward march of the RN, alongside the potential comeback of Donald Trump in the US, has brought fears for the future of democracy in the west. He argues, however, that voters will, as in the past, become swiftly disenchanted once the simple solutions offered by national populists fail in practice.

“France and the US may be about to relearn this painful lesson,” he concludes. “Sadly, the consequences of their folly will be felt around the world.”

Sign up for our Europe Express newsletter, the essential daily guide to EU affairs

Need to know: UK and Europe economy

With just three days to go before the UK general election, the FT editorial board said Britain needed a fresh start and that the opposition Labour party should be given the opportunity to provide it. Here are Labour’s options for boosting trade with Europe.

Bundesbank chief Joachim Nagel called for German tax cuts to boost investment in the EU’s largest economy.

Viktor Orbán, prime minister of Hungary, who today takes over the EU’s rotating presidency, set out plans in the FT to “make Europe competitive again”.

EU motorists are set to pay at least an extra 50 cents a litre on diesel from 2031 to cover carbon costs, according to new analysis. Fuel suppliers will be required to buy allowances from 2027 to cover their carbon dioxide emissions and are expected to pass that cost to consumers. The US is looking at carbon pricing on imports, targeting goods from “dirtier” countries.

A flood of cheap Russian fertiliser risks European producers going out of business, posing a risk to long-term food security, the crop nutrient industry warned. Poor harvests in Spain and other producing countries have created a global shortfall of olive oil.

Need to know: Global economy

Democrats defended US President Joe Biden despite his poor performance at last week’s TV debate and growing concern about his fitness in opinion polls. Here’s an explainer of how Democrats might replace him. Berkeley professor Barry Eichengreen explains how America’s choice of president will affect the dollar.

China’s central bank plans to intervene directly in bond markets after borrowing costs hit their lowest level in two decades. Investors have piled into the bonds, sending yields down, as they hunt for haven assets in a weak economy.

The Bank for International Settlements, the umbrella bank for central banks, said cutting interest rates too soon risked inflation flaring up again, particularly in services prices and wage growth.

The Philippines is on the hunt for western investment to develop its nickel reserves, marketing itself as an alternative to the China-dominated supply chain for the critical battery metal. It is currently the world’s second-largest producer, albeit far behind industry leader Indonesia.

Need to know: Business

Some of Europe’s biggest industrial groups are urging Brussels to toughen subsidy requirements to limit the threat to the region’s hydrogen equipment manufacturers from cheap Chinese imports.

A probe by Italian investigators into illegal labour used by Dior suppliers has unsettled the luxury industry. Until now, such supply chain issues have focused more on cheap fast fashion rather than producers of more expensive goods.

The advance of artificial intelligence appears to have hit a barrier in financial services, where bankers have held back from embracing the technology over fears of job losses and regulatory concerns.

The World of Work

The FT Working It podcast has a practical three-part mini-series about AI at work: what it can do, what it can’t do — and what might happen in the future. Listen to the series in full here.

Acquiring the right habits and work practices does not necessarily lead to soaring productivity, argues columnist Pilita Clarke: stamina is essential too.

Asking staff to promote their company on social media doesn’t always result in a positive marketing boost. Requests that staff take work out of the office can also be perceived as an intrusion.

Some good news

New research that highlights how the brain and gut talk to each other has raised new hopes for treating food addiction and related eating disorders.