Market watchers have welcomed French presidential favourite Emmanuel Macron's first round success
By Sybille de La Hamaide and Matthias Blamont
PARIS/HENIN-BEAUMONT, France (Reuters) - Centrist Emmanuel Macron took a big step towards the French presidency on Sunday by winning the first round of voting and qualifying for a May 7 runoff alongside far-right leader Marine Le Pen.
Though Macron, 39, is a comparative political novice who has never held elected office, new opinion polls on Sunday had him easily winning the final clash against the 48-year-old Le Pen.
Sunday's outcome is a huge defeat for the two center-right and center-left groupings that have dominated French politics for 60 years, and also reduces the prospect of an anti-establishment shock on the scale of Britain's vote last June to quit the European Union and the election of Donald Trump as U.S. president.
In a victory speech, Macron told supporters of his fledgling En Marche! (Onwards!) movement: "In one year, we have changed the face of French politics." He went on to say he would bring in new faces and talent to transform a stale political system if elected.
Conceding defeat even before figures from the count came in, rival conservative and Socialist candidates urged their supporters now to put their energies into backing Macron and stopping any chance of a second-round victory by Le Pen, whose anti-immigration and anti-Europe policies they said spelled disaster for France.
As investors breathed a collective sigh of relief at what the market regarded as the best of several possible outcomes, the euro soared 2 percent to $1.09395 when markets opened in Asia before slipping back to around $1.0886.
It was the euro's highest level since Nov. 10, the day after the results of the U.S. presidential election.
In a race that was too close to call up to the last minute, Macron, a pro-EU ex-banker and former economy minister who founded his own party only a year ago, had 23.54 percent of the votes against 22.33 percent for Le Pen, according to partial figures from the Interior Ministry with the bulk of votes counted.
Seconds after the first projections came through, Macron supporters at a Paris conference center burst into the national anthem, the Marseillaise. Many were under 25, reflecting some of the appeal of a man aiming to become France's youngest head of state since Napoleon.
"PRESIDENT OF PATRIOTS"
With an eye to Le Pen's avowedly France-first policies, Macron told the crowd: "I want to be the president of patriots in the face of a threat from nationalists."
If he wins, Macron's biggest challenges will lie ahead, as he first tries to secure a working parliamentary majority for his young party in June, and then seeks broad popular support for labor reforms that are sure to meet resistance.
Addressing the battle ahead, he declared he would seek to break with a system that "has been incapable of responding to the problems of our country for more than 30 years".
"From today I want to build a majority for a government and for a new transformation. It will be made up of new faces and new talent in which every man and woman can have a place," he said.
Le Pen, who is herself bidding to make history as France's first female president, follows in the footsteps of her father, who founded the National Front and reached the second round of the presidential election in 2002.
Jean-Marie Le Pen was ultimately crushed when voters from right and left rallied around the conservative Jacques Chirac in order to keep out a party whose far-right, anti-immigrant views they considered unpalatably xenophobic.
His daughter has done much to soften her party's image, and found widespread support among young voters by pitching herself as an anti-establishment defender of French workers and French interests against global corporations and an economically constricting EU.
"The great issue in this election is the rampant globalization that is putting our civilization at risk," she declared in her first word after results came through.
She went on to launch an attack on the policies of Macron, whom she again described as "the money king" in a disparaging swipe at his investment banker background.
His deregulation policies, she said, would lead to unjust international competition against France's business interests, mass immigration and free movement of terrorists.
Nevertheless, with several defeated candidates calling on supporters to stop her, Le Pen she seems destined to suffer a similar fate to her father when she goes up against Macron in two weeks' time.
Defeated Socialist candidate Benoit Hamon, Socialist Prime Minister Bernard Cazeneuve and defeated right-wing candidate Francois Fillon all urged voters to rally behind Macron in the second round.
A new Harris survey saw Macron winning the runoff by 64 percent to 36, and an Ipsos/Sopra Steria poll gave a similar result.
In Berlin, German Chancellor Angela Merkel's spokesman hailed Macron's success, tweeting: "Good that @EmmanuelMacron succeeded with his policy for a strong EU and social market economy. Wishing him all the best for the next two weeks."
European Commission President Jean-Claude Juncker expressed similar good wishes for the second round, his spokesman said in Brussels.
It was a bitter night for Fillon, seen as a shoo-in for the Elysee until he was hit in January by allegations that his wife had been paid from the public purse for work she did not do.
Ifop give him 20.0 percent in the first round and far-left contender Jean-Luc Melenchon 19.5 percent.
"This defeat is mine and it is for me and me alone to bear it," Fillon, a 63-year-old former conservative prime minister, told a news conference, adding that he would now vote for Macron.
The two politicians left in the race offer radically contrasting economic visions for a country whose economy lags that of its neighbors and where a quarter of young people are unemployed.
Macron's gradual deregulation measures are likely to be welcomed by global financial markets, as are cuts in state expenditure and the civil service. Le Pen wants to print money to finance expanded welfare payments and tax cuts, ditch the euro currency and possibly pull out of the EU.
"Markets will be reassured that the dreaded Le Pen versus Mélenchon run-off has been avoided," said Diego Iscaro, an economist from IHS Markit.
"As a result, we expect some recovery in French bond prices, while the euro is also likely to benefit," he said. "However, a lot can happen in two weeks and French assets are likely under some pressure until the second round is out of the way."
Timothy Ash, an economist at Bluebay asset management, said Trump's victory last November marked a turning point for electorates playing the protest card.
"Despite all the hype about the rise of populism, 60 percent of voters went for mainstream candidates ... In an uncertain world, they rather go for what they know best and want to take fewer risks," he said.
(Additional reporting by Sudip Kar-Gupta, Bate Felix, Michaela Cabrera, Michel Rose, Geert De Clercq, Mathieu Rosemain, John Irish, Andrew Callus, Sarah White, Ingrid Melander and Leigh Thomas in Paris, and Ilze Filks in Henin-Beaumont; Writing by Richard Balmforth; Editing by Kevin Liffey)