Political risks continue to drive risk aversion

European markets are floundering as the political fears rise ahead of the French election. However, could we see stocks rise alongside the likes of gold?

• European stocks flounder amid rising political fears

• Could a le Pen win undermine EU project?

• Gold leads risk-aversion charge

European markets are largely treading water this morning, as the bullish sentiment of yesterday morning seems to have disappeared into a mist of negativity surrounding Trump’s UK visit and the potential of a Le Pen victory. The possibility of a right wing win in France is raising fears in Europe, as highlighted by the rising yields on French treasuries. With the spread between French and German yields rising to the highest level in four years, there is clearly a significant degree of anxiety that is creeping into the market mindset. If 2016 told us anything, it is to expect the unexpected and whilst the UK’s referendum result was a knock to the EU, the upcoming elections have the possibility to really undermine the project as a whole.

Gold has managed to hit a near three-month high this morning, with the flight to safety continuing apace once more. The outperformance of gold, alongside bond yields and the yen highlights the worries that are rumbling on beneath global markets. Despite the possibility of stock market gains, driven by a weakening pound and the expectation of a Trump fuelled stimulus package, there remains a whole host of political risks within the globe at present which provides the perfect basis for a continued rise for gold.

Ahead of the open we expect the Dow Jones to open 1 points higher, at 20,091.