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Dutch election results bring temporary relief, optimism to European money managers

Geert Wilders, leader of the Dutch Freedom Party and known as the ‘Dutch Donald Trump,’ was soundly defeated in Wednesday’s election.

Mark Rutte of the Dutch People's Party for Freedom and Democracy took the prime minister seat, defeating competitor Geert Wilders in the final round of general elections on Wednesday.

The Netherlands voted for its pro-European Union candidate much to the relief of investors. Money managers said that markets responded well to the election outcome and expect a healthy prospect for European equities and bonds.

Sam Twidale, European equities fund manager at Schroders, said: “We believe there are strong arguments to be positive on the outlook for European equities (as) the cyclical recovery across Europe is clearly gaining momentum, with lead indicators remaining positive and signs of improving confidence amongst corporations and consumers”.

“The threat of deflation also appears to have been avoided, with inflation now approaching the European Central Bank's 2% target,” Mr. Twidale said.

Lukas Daalder, chief investment officer at Robeco's investment solutions unit added: “Not surprisingly, sentiment in financial markets is positively impacted, with spreads in European bonds declining and the euro rising on the back of the election outcome. Having said that, we should not overstate the impact: the rate hike that the U.S. Federal Reserve administered yesterday has been the more dominant factor in financial markets, lifting both bonds and stocks.”

But money managers say political uncertainty is likely to persist as attention turns to France, where the national election is entering its final stage with votes on April 23 and May 7.

Tom Ross, credit portfolio manager at Henderson Global Investors said, “Markets have responded positively in early trading — with corporate bond prices climbing and the euro holding on to yesterday's gains as fears of a eurozone breakup recede. The real test, however, remains France, where the final two-horse race for the French presidency in late spring offers a stronger prospect of a political upset.”