Markets Live: Investors cheer France

That's it for Markets Live today.

Thanks for reading along and for your comments.

The ASX is closed for ANZAC day tomorrow, so we'll see you here at 9 on Wednesday. 

The local sharemarket closed higher - but not as high as it started, after falling iron ore futuresand a sell-off of Chinese stocks provided some downward pressure.

The benchmark ASX200 closed up 0.3 per cent to 5871.8 in broad-based gains, while the broader All Ordinaries added 0.3 to 5900.7.  

Enjoying the day's strong early momentum were the big banks, with all four majors up between 0.5 to 0.9 per cent. Blue chips like Cochlear and Domino's also rose strongly, up 0.4 and 0.8 per cent respectively. 

Energy was another stand-out sector. Woodside Petroleum added 0.8 per cent, as did Santos, while Oil Search and Beach energy were both 0.7 per cent higher. Oil oil futures added 1 per cent on Monday, which may have driven the gains. 

Finishing the day in the red were some of the miners. The most-traded iron ore future contract on the Dalian exchange declined 1 per cent. On the ASX, Fortescue Metals shed 2.6 per cent. Rio Tinto was 0.7 per cent lower while BHP Billiton fell 0.4 per cent. 

The day's biggest loser was Sirtex Medical, which plunged 12.9 per cent after telling shareholders its live cancer drug hadn't demonstrated an increase in overall survival in clinical trials. 

Meanwhile, shares in Spotless declined 0.5 per cent, after it advised shareholders to reject a takeover bid by Downer EDI. Downer's shares parred early gains to finish flat. 

Forget Trump - it's China that will determine how asset classes grow in the next little while, according to analysts at one investment bank.

In a note released at the end of last week, a team of analysts at Bank of America Merrill Lynch - led by equity strategist Ajay Singh Kapur - argued that global investors should adopt a defensive stance, as growth in China, which accounts for nearly a fifth of the world's GDP, has passed its peak.

They recommended investors focus on local and defensive sectors and away from the cyclical stocks that have benefited the most from a surge of US economy-led confidence in recent months. 

At the National People's Congress in late March, the Chinese government announced a 6.5 per cent annual growth target for 2017 - the lowest figure in two decades. Chinese growth exceeded expectations in the first quarter of this year, with GDP growing 6.9 per cent. But BoA Merrill Lynch analysis suggests growth has peaked and will slow in coming quarters. 

They acknowledge that theirs is a counter-consensus call and they've received some pushback. Most investors have their sights set firmly on the US, where economic confidence and the promise of fiscal stimulus is expected to give the economy a boost. But the BoA analysts have stuck to their guns arguing that impact of Chinese nominal GDP growth on asset class price movements, particularly when assessing cyclical over defensive stocks, is "overwhelming".

"We think that a potential peak in China's nominal GDP growth means a weakening in its impulse to global nominal growth, and a possible peak in PPI [producer price inflation] suggests it will export less inflationary impulses globally – the opposite of the past five quarters."

Using just one indicator of global demand to make global asset allocations can seem insufficient, the analysts acknowledged. But given the sheer importance of Chinese nominal GDP growth, a series of other considerations, such as earnings momentum, relative valuations and investor positioning, would need to be "equally as strong to prefer cyclicals over defensives". 

In Australia, this favours sectors like retail, telecommunications and financial stocks. Stocks highly exposed to Chinese growth include the miners, energy, software, and food and staples retailing. 

There's no stopping the gold bulls.

Hedge funds increased their wagers on a gold rally to the highest since November, betting that this year's 12 percent advance has more to go. Investors are also loading up on the metal through exchange-traded products, pouring $487 million into SPDR Gold Shares on Wednesday. That was the biggest daily inflow into the world's top bullion ETF in seven months.

Gold is shining bright as the dollar trades near the lowest since November, lifting the appeal of alternative assets. At the same time, escalating tensions between the U.S. and North Korea have boosted demand for a haven, while delays in implementation for President Donald Trump's campaign promises to cut taxes and pursue a pro-growth agenda are clouding the outlook for earnings.

"There's an appetite for storehouses of wealth at this point," said Peter Sorrentino, the Dallas-based chief investment officer of Comerica Asset Management Group, which oversees $43 billion, including gold ETFs. "Rather than run the risk of having your dollars eroded on a relative basis, you can use gold as a life raft to sort of avoid a sinking ship."

Money managers raised their gold net-long position, or the difference between bets on a price increase and wagers on a decline, by 15 percent to 161,263 futures and options contracts in the week ended April 18, according to U.S. Commodity Futures Trading Commission data released three days later.

Standard Chartered Plc and Bank of America Merrill Lynch say the metal is headed towards $1,300, while Societe Generale SA recommends investors take long positions in the metal.

Geopolitical tensions are giving gold a boost, Standard Chartered analysts including Suki Cooper, wrote in a note April 18. Last week, Vice President Mike Pence said North Korea shouldn't doubt Trump's resolve after his "decisive action" against Syria and Afghanistan. The U.S. dropped the largest non-nuclear bomb it's ever used in combat on Islamic State positions in Afghanistan April 13, days after it launched a cruise missile strike against Syria.

Prices however have taken a knock today on speculation that pro-growth centrist Emmanuel Macron will become France's next president by defeating far-right nationalist Marine Le Pen in the second round of the presidential elections on May 7. Gold futures in New York fell 1 percent to $1,276.30 an ounce on Monday, paring the month's gain to 2 percent.

Morningstar - whose fund ratings have for thirty years helped propel the fortunes of the world's biggest fund managers - has like fund managers suffered from the rise of passive investing, which lessens the demand for its data and expertise. Its answer to this is to get into the fund management game itself. It will launch nine mutual funds later this year, which, as this article in Barrons explores, has some fund managers crying 'conflict of interest': 

For many, the move into fund management represents a new conflict. After all, a firm best known for evaluating funds is now going to manage them. [CEO Kunal] Kapoor insists it's business as usual; at the end of the day, the company is still choosing managers, arguably in a more efficient manner. "We already have those relationships today," he says.

Indeed, it's hard to come up with a compelling scenario in which a problem or conflict could actually arise. The firm's star ratings are purely quantitative. They're based on several periods of a fund's performance, and all funds are rated once they have a three-year track record. The top 10% are given five stars, the bottom 10% get one star, and the rest are disseminated on a bell curve. (See "How to Use the Ratings." below)

Yet the perceived contraversy has given rise to renewed complaints about the firm's influence. Will Morningstar, for example, rate its own funds? In part. The funds will get a star rating once they have a three-year performance history. They will not, however, get an analyst, or medalist, rating. The firm assigns 3,554 funds these forward-looking, qualitative ratings. This is an analysis of many factors, including the manager's history, the fund's current portfolio, and the stewardship of the company that owns it. The star and medalist ratings are both hugely influential, and they hurt or help fund companies where it matters—flows.

Over the past five years, more than $1 trillion has gone into four- and five-star-rated funds, while $474 billion has exited lower-starred funds.

Read the rest at Barrons.

Chinese stocks have dropped the most in three months as a sell-off spread to defensive shares, this year's best performers.

The Shanghai Composite index fell as much as 1.9 per cent, the biggest intraday loss since Jan. 16, before paring declines to 1.6 per cent by the lunchtime trading break.

Industrial and materials shares were among the biggest decliners on the CSI 300 Index, which is 1.3 per cent down.

The ChiNext small-cap index, seen as a barometer for Chinese stock-market sentiment, headed for its lowest close since September 2015. The Shanghai Composite is extending its biggest weekly loss in four months amid heightened regulatory scrutiny and a crackdown on leveraged trading.

The A-share gauge was among the world's worst-performing equity markets last week, and have mostly erased the year's gains. The Shanghai benchmark is off 5 per cent in under twp weeks.

China's banking regulator, which said late Friday that it will focus on guarding against financial risks, has ordered local units to assess cross-guaranteed loans, according to a Caixin report.

"Market sentiment has been dampened by recent tightening supervision on all fronts such as the banking commission,insurance commission, securities regulator," said Ben Kwong,executive director of KGI Asia in Hong Kong.

"They expressed concern about bubbles and credit defaults. The deleveraging process is still in progress."

The declines dented optimism in Hong Kong, where the Hang Seng index is down 0.1 per cent, erasing an earlier gain of as much as 0.7 per cent that had come amid global risk appetite on bets that pro-growth centrist Emmanuel Macron will be France's next president.

The Hang Seng China Enterprises index is marginally lower after retreating from an advance of 1.1 per cent.

China's securities regulator has stepped up criticism of what it called disruptive trading behaviour, with chief Liu Shiyu saying this month that the country's bourses should punish market irregularities "without mercy".

Traders will be watching to see whether the Shanghai gauge pares losses to less than 1 per cent by the close, as has been the pattern recently. The index has gone 86 trading days without a loss of more than 1 per cent on a closing basis, the longest stretch since the market's infancy in 1992.

TPG shares are trading at half the value they had in September last year. But does this make them a good investment?

Short interest in the stock has risen, but it still has plenty of true believers. And the analysts are no less divided, with 12-month target prices as diverse as $10.00 (from Morgan Stanley) to $4.63 (from Shaw and Partners).

From this morning's paper:

This time last year TPG Telecom's surging market capitalisation was higher than that of Qantas, News Corp and Crown Resorts.

But since the company warned investors in September that margins in its consumer broadband business would be severely squeezed by the National Broadband Network, its share price declined ...  

It took another blow this month, as it outlined an audacious plan to counter this.

Having paid $1.2 billion at a government auction for mobile spectrum, above the market's expectations, TPG announced it would invest a further $600 million over three years to become Australia's fourth mobile network, reaching 80 per cent of Australians. The strategy comes hot on the heels of a spectrum purchase in Singapore, where the company also plans to break up the local mobile oligopoly.

TPG has never operated a mobile network before, and has never expanded outside Australia. While investors uniformly praise TPG founder, CEO and significant shareholder David Teoh, who grew the company from a small computer hardware store in Sydney to an ASX heavyweight, there's no denying he has a lot on his plate.

As Watermark Funds Management investment analyst Delian Entchev puts it: "If you're looking at TPG today as an investment, you're not investing in the company, so much as investing in David Teoh's ability to pull this off."

Read more at the AFR.

Time for a late lunch wrap, and shares have given up about half of their early gains, as Telstra and CSL turn negative and as gains in the banks is offset by mining losses.

The ASX 200 is 16 points higher, or by 0.3 per cent, at 5870.

CBA, Westpac and NAB are all 0.7 per cent higher and ANZ 0.4 per cent, which is slightly down from the morning's gains. But Macquarie has added steam, now up 1.6 per cent.

As mentioned, Telstra started off strong but is now off 0.2 per cent and CSL is 0.1 per cent lower.

Still, there are more stocks higher than lower, so the mood is broadly upbeat, befitting the "sigh of relief" that followed France's first round of voting. The Aussie is up a little more at 75.6 US cents. The euro has given up some of its post-poll gains agains the US and Australian dollars, but remains stronger since Sunday.

The major drag are the miners and listed property. Chinese iron ore futures have tumbled again over last night and this morning, with Rio off 0.8 per cent and Fortescue 2.7 per cent. BHP is down 0.7 per cent, despite support for energy names from a recovering oil price.

The selling in Sirtex has intensified, with the stock now 14 points down after a poor clinical trial result.

The immediate sighs of relief following Sunday's French vote would be experienced well beyond markets, Mohamed El-Erian writes:

Two central banks -- the European Central Bank and the Swiss National Bank -- would be able to shelve plans to stabilise markets through exceptional measures in order to avoid wild moves in the currencies, at least for now.

The Greek government would feel slightly more confident about the possibility of avoiding a debt cliff in the summer, though it still needs to resolve differences between the International Monetary Fund and European partners. And Germany would be less concerned about being forced further into anchoring a euro zone subject to growing forces of fragmentation.

With the relief, some investors may be tempted to go further and interpret the result as an indication that the wave of anti-establishment sentiment that delivered Brexit and the Donald Trump presidency has dissipated, allowing markets to set aside considerations of political and geopolitical risk in a more significant manner. But that would be premature, including when it comes to France, for two related reasons.

First, not all the uncertainty in France has been lifted. Even if Macron prevails in the second round, the country's political system still has to deal with the fallout from a marginalisation of mainstream parties in the presidential race that is unlikely to extend to the legislative elections that are scheduled for June. Some form of "cohabitation" -- a government made up of a president of one party and a prime minister from another -- will have to emerge, which is far from a straightforward proposition.

Secondly, although an immediate extreme outcome has been avoided, there is no denying that this is another example of an event deemed improbable not so long ago becoming reality. Remember, few initially took seriously Macron's notion of getting to the second round as he was powered by a movement rather than a party.

Questions remain, though markets understandably will be relieved by the outcome of this first round. A potential bullet has been avoided and, absent an unanticipated shock, the markets already expect the second one to be avoided in the next round of voting. But it is way too early to declare an end to the anti-establishment phenomenon that has turned improbables, if not unthinkables, into realities.

Australia's housing market may be at its peak in this cycle, according to some experts (see below), and investors might be wondering whether they should look for alternative places to put their money.

With four of the top twenty Australian companies trading at discounts to their long-run averages, the top tier of the stockmarket might be a good place to start.

BHP Billiton, Rio Tinto, Telstra and Wesfarmers are the only stocks in the ASX 20 trading below their long-run price-earnings multiples.

Goldman Sachs head of portfolio strategy Matthew Ross said that resource stocks were potentially offering the best value for investors, with the big four banks "mildly expensive" compared with an historical basis and many industrial stocks in the broader ASX 200 trading at multiples of more than 20 per cent over their long-run averages over the past 10 years.

Big might well be better. The ASX 20, even with the mildly expensive banks of ANZ, Commonwealth Bank, NAB and Westpac among them, is currently trading on a forward multiple of 14.6 times, a narrower 6 per cent above its 10-year average.

Mr Ross said the big resource stocks were still marginally inexpensive on a valuation basis and may be a sensible option for those looking for value.

Telstra poses a conundrum, with a yield of more than 7 per cent but structural issues looming. Telstra shares have come under extra pressure in the past couple of weeks after David Teoh's TPG's buy-up of spectrum ahead an entry into the mobile phone market, losing 20 per cent since mid-February when they traded at $5.22.

Mr Ross said the yield for property investors in Australia's residential property markets had been shrinking over the past 15 to 20 years as prices moved higher, particularly in Melbourne and Sydney. But investors with exposure to property, shares and other assets classes tended not to directly compare yields from property with other assets.

"Property has become more and more expensive on most metrics," Mr Ross said.

Read more at the AFR.

It's the phrase no investor in a speculative biotechnology company wants to read: "No difference in survival".

And yet there it was this morning, the final four words in the headline atop an announcement from Sirtex Medical.

The Sydney-based medical device maker had to front up to the market with the news that the SARAH trial of its innovative SIR-Spheres product for liver cancer did not extend the lives of patients when compared to the standard chemotherapy treatment.

Sounds like a big fat failure, right?

Well you wouldn't know it from the upbeat tone interim chief executive Nigel Lange took on an analyst call to explain the results.

"We are truly excited by this opportunity to go out and market SIR-Spheres with this new data in this important indication," was how Lange wrapped up the call.

Nor really would you get the sense this was an end of the road type moment by looking at the share price reaction. Sirtex shares were down 11 per cent at 11:30am to $15.15, but for long-time watchers of the stock that's nothing.

Sirtex's faithful followers lost a whopping 55 per cent, which wiped $1 billion in market value, in March 2015 when its much anticipated, seven-year SIRFLOX came up short of showing any statistical significance in the inhibition of tumours in metastatic colorectal cancer patients.

But the reason the company still holds a glimmer of hope is another short phrase: "quality of life".

The outlook for patients diagnosed with liver cancer patients is not great. Often the disease is an aggressive one and the options for treatment are limited. Chemotherapy is one, and in the case of the SARAH trial, the standard drug sorafenib was used.

But often liver tumours are inoperable or cannot be treated by radiation, because of the damage that would do to nearby organs. This is where Sirtex's SIR-Spheres come in. They are radioactive beads inserted into the blood stream that attack cancers from the inside, known as Selective Internal Radiation Therapy or SIRT.

Sirtex had hoped its treatment would increase the length of survival for hepatocellular carcinoma patients (HCC), but both groups in the randomised trial - those taking sorafenib or those who got the SIR-Spheres - lived for an identical time beyond treatment: 9.9 months.

But over the weekend at the International Liver Congress in Amsterdam, the researchers behind Sirtex's SARAH study were able to present some other promising findings, namely improvement in side effects and quality of life measures.

WorleyParsons will consider teaming up with the Dar Group to work on global engineering and infrastructure projects after the Dubai-based group snapped up 19.9 per cent of the Australian company.

"If there are opportunities that we can work together, then we'll do it, absolutely," CEO Andrew Wood told The AFR. "Particularly in the Middle East and Africa."

WorleyParsons has not previously worked with privately-owned Dar, which has 13 companies around the world specialising in civil engineering, project management and infrastructure consultancy.

But the Australian engineering group is willing to consider ways the two groups can work together. "They are an infrastructure business largely ... and we do a lot of infrastructure work in the communities in which we do energy work," Mr Wood said.

Qatar is among the countries in which WorleyParsons works on infrastructure projects as well as energy projects. Current infrastructure developments include a new planned city in Qatar called Lusail City, which will host the opening ceremony of the 2022 FIFA World Cup.

WorleyParsons has been reassuring employees and investors that Dar's sudden appearance as the largest shareholder on its register in February with a 13 per cent stake – which it later lifted to almost 20 per cent – is a "vote of confidence" in the company.

The engineering company's share price slumped in mid-February after WorleyParsons disclosed it was having problems collecting cash from four key customers in its half year results, but is now trading at its highest levels for two years after Dar revealed it had approached the group's board with a $2.9 billion takeover proposal worth $11.80 per share in November.

Some shareholders have criticised WorleyParsons for not disclosing Dar's proposal to shareholders, but Mr Wood said the November proposal was "highly conditional". The proposal's conditions included securing financing as well as due diligence.

WorleyParsons is not actively soliciting takeover proposals, Mr Wood said.

"We're not a seller ... for us, the focus is on performance, cash and getting the balance sheet into a good shape."

Spotless Group's board has told investors to reject Downer EDI's $1.2 billion takeover offer, arguing it does not represent "adequate value."

"If we remain an independent listed entity, the directors are confident that the fundamental strengths of Spotless' core business, together with management's execution of the strategy reset will deliver greater value to Spotless' shareholders than the Downer offer in the medium term," Spotless chairman Garry Hounsell said in a statement this morning.

Downer, which owns 19.9 per cent of Spotless, has offered $1.15 per share for the company.

Spotless also said that talks with a listed global facilities services company over a potential alternative bid had fallen apart on Saturday.

Spotless said it was rejecting the offer because it believed the hostile bid was "opportunistic and timed to take advantage of a historical Spotless share price low," and because the company had "a clear plan to deliver earnings growth and long term value to shareholders."

"Despite Spotless only recently implementing its strategy reset, early signs of success are evident and demonstrate its growth potential," the services group said.

New York-based hedge fund Coltrane Asset Management, which owns 10.37 per cent of Spotless, intends to reject the offer at the current price, but has not made a final decision, Spotless said.

Spotless plans to release its target's statement on Thursday and provide full-year earnings guidance for 2017 and 2018. It has not yet provided an independent expert's valuation of the bid.

One of the conditions of Downer's takeover offer is that Spotless does not lower the full year guidance it provided at its half year results in February when it told investors to expect net profits after tax of between $80-$90 million.

Spotless shares closed on Friday at $1.11, the equal highest close since the bid was announced, and were down 1¢ at $1.10 in morning trading on Monday. Spotless shares had been languishing at 72.5¢ before Downer made its offer in March.

Ring that bell!

The booming housing market could finally be about to turn as auction clearance rates fell back over the weekend and analysts from investment bank UBS "calling the top".

Clearance rates in the biggest housing markets of Sydney and Melbourne fell back into the mid-70 per cent range over the weekend – Sydney saw its lowest clearance rate for the year – after weeks of results above 80 per cent.

While the weekend clearance results and number of listings were much softer compared to previous weeks due to school holidays, Easter and ANZAC day, some properties recorded results $350,000 to $900,000 over their reserve.

With heightened concerns from the Reserve Bank of Australia and retail banks steadily increasing lending rates – the Commonwealth Bank lifted again on Friday – some are now sensing the top has been reached.

Investment bank UBS published a 69 chart deep-dive analysis and said it was now "ringing the bell" and "calling the top" for both activity and house price growth.

"While the historical trigger for a housing downturn [of RBA hikes] is missing, mortgage rates are rising, and sentiment of home buying collapsed to a record low," UBS' economists Scott Haslem, George Tharenou and Jim Xu said in a note to clients.

"Looking ahead price growth has likely now peaked, and we see a moderation ahead amid record supply and poor housing affordability.

They believe home price growth running at four times income growth is "unsustainable".

"We are 'calling the top', but stick to our forecasts for commencements to 'correct but not collapse'."

But other analysts disagree. Louis Christopher, who has been accurately forecasting price growth in Sydney, said it was far too early to tell and wanted more information on four key areas including a more definite trend in clearance rates, total listing levels, house finance data (which has continued to show growth) and asking prices.

"Before we call any slowdown we would want to see clearance rates fall into the 60 per cent range then I would start to pay serious attention," Mr Christopher said, "I think we need a lot more information."

Shares are enjoying a solid start to the morning's trade as investors react positively to the weekend's French vote, pushing the ASX 200 up 23 points, or 0.4 per cent, to 5880.

The big banks are doing much of the lifting, although the gains are broad, with only 56 of the top 200 names lower.

The big four lenders plus Macquarie are all higher by between 0.8 and 1 per cent. Elsewhere in blue-chip land, Telstra is up 0.8 per cent and CSL 0.5 per cent. The supermarket owners are mixed, with Woolies up 0.4 per cent but Wesfarmers 0.3 per cent lower. All pretty undramatic moves.

Miners are a somewhat surprising loser in early trade. Rio is off 0.3 per cent and Fortescue is down 1.2 per cent. BHP is 0.3 per cent lower, which you might blame on a bit of a dip in oil prices over the weekend, except Woodside has climbed 0.4 per cent, pacing the energy sector's gains.

The morning's best performer in the top 200 is Tassal as it reports that a survey showed its lease at Macquarie Harbour is "back to 100% compliance" with environmental regulations. The stock is up 4 per cent.

The early lagger is Sirtex as it releases drug trial results and plunges 7 per cent.

Village Roadshow has issued a trading update, warning EBITDA from its theme parks division will be between $55 million and $65 million for the 2016-17 year.

This means it could see a decline of up to 37 per cent in earnings from one of its key divisions. Attendance is down nearly 10 per cent since a tragedy at Ardent Leisure's Dreamworld park, which killed four visitors.

The stock has been whacked 13 per cent in very early trade to last fetch $3.50.

The previous financial year Village earned EBITDA of $88 million from its theme parks, which include Warner Bros. Movie World, Sea World, Paradise Country and Wet 'n Wild.

"The theme parks division continued to be significantly impacted by the tragedy which occurred at Dreamworld in October 2016, and was further affected by cyclonic weather conditions in March/April 2017," the company's statement said.

"[Village] firmly believes that the theme parks division will return to normal levels over time following key marketing campaigns and the introduction of new attractions.

"Attendance numbers at Wet 'n Wild in Sydney are expected to be lower in the second half of the financial year than they were in the lead up to Christmas.

Last week the company announced it had off-loaded most of its film financing arm, Village Roadshow Entertainment Group, to private equity investors. The board said Village currently carries unacceptable levels of debt at 3.27 times earnings.

This was the other big news over the weekend: US prez Donald Trump on Friday night said his tax plan will result in "massive" tax cuts for both individuals and businesses.

The cuts will be "bigger I believe than any tax cut ever," he said, according to an AP report.

Trump touted the coming announcement again on Saturday, US time, telling his 28 million Twitter followers:

But then the back-pedal: the White House will offer "specific governing principles" for its tax plan this week along with indications of what new rates would be, but a complete proposal probably won't be ready until June, Trump's budget director said.

"What you're going to see on Wednesday is for the first time is, here's what our principles are, here are some of the ideas that we like, some of the ideas we don't like, and we can talk about that more if you want to," Mick Mulvaney, director of the Office of Management and Budget, said on American Sunday morning TV. "Here are some of the rates we're talking about."

Asked about his previous comments that the full plan with bill language probably won't be released until June, Mulvaney said "that's still probably fair. " The administration has started working with House and Senate committees "as we try and build some momentum for this tax plan," he said.

Mulvaney said the administration hasn't decided whether its plan will be revenue neutral, which would be needed to meet the criteria set by lawmakers to make tax changes permanent, or will add to the national debt.

Bloomberg reported on Friday that Trump's plan probably won't include a border-adjusted tax, or BAT, suggesting the president's proposed measures won't be revenue neutral. That's because the border tax that House Speaker Paul Ryan has proposed would generate more than $1 trillion in revenue over a decade, helping to offset the cost of individual and corporate rate cuts.

Treasury Secretary Steven Mnuchin and other senior officials have signalled that the administration is more concerned about growth and job creation and will rely on so-called dynamic scoring rather than revenue neutrality in crafting its changes.

Under dynamic scoring, a tax plan's revenue effects are considered in the context of the plan's impact on economic growth and consumer well-being.

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The ASX is set for a upbeat start, reckons IG analyst Gary Burton:

As an overview, the market largely got [the French polls] right, as the VIX volatility indicator, a measure 3 month forward option pricing, did not move to extreme levels and should settle lower in today's trade.

This early retreating risk may be the big game changer for the markets, as US data and earnings continue to remain supportive of the current rally, with the recent commentary around the time table for tax cuts that saw the S&P 500 close positive for the week and the NASDAQ close towards all-time highs.

With early US company reporting on revenue and earnings per share growth currently showing over 84% have beaten analysts' expectations, around 75% of the S&P 500 will be reporting this week.

Overnight the US consumer confidence numbers will come through with an expected rise from 124 to 125.6 again a positive for traders on the long side of the market. For today, investors will be focused back on the market data this week including German business confidence out at 6pm today and also expected to be positive and adding to market sentiment for the bulls.

Our ASX market will be closed for the ANZAC holiday tomorrow so there may be some further price volatility into today's close as the first European markets open later in the evening, but a very positive day expected.

Read more.

European assets look set to benefit from the weekend's vote, writes AMP Capital's Shane Oliver:

With a majority of the French in favour of the Euro and highly negative to the far right National Front (partly for historical reasons) and the polling gap in favour of Macron in excess of 20% which is well beyond the standard error, our base case remains that Macron will win on May 7.

This would be a big positive for Eurozone assets. It would reinforce the impression that the populists are not winning in Europe. While some see the German election in September as a threat this is very unlikely as the contest looks to be between Angela Merkel and the Social Democrats under Martin Schulz who are even more pro Europe, with the nationalist Alternative for Deutschland polling very poorly.

This in turn should help reduce Eurozone break up fears. While Italy remains a risk for next year, this all comes at a time when Eurozone assets are relatively cheap globally and Eurozone economic data continues to improve. All of which is consistent with retaining a large exposure to Eurozone shares.

For Australia, the outcome of the first round of the French election is unlikely to have a major impact beyond keeping in place the currently favourable global growth backdrop. That said there is likely to be a mild relief rally in the Australian share market today and the $A has already had a 0.4% bounce against the $US reflecting its "risk on" status.

And here's the take from Societe Generale strategist Kit Juckes:

​There is a huge amount to be said in the weeks and months to come about the historic failure of the two establishment parties in France to make it through to the second round of the Presidential election, and indeed about what that means for upcoming Parliamentary elections.

But for now, the biggest takeaway from the first round result (and while the final count isn't know yet, it results in a vote-off between Emmanuel Macron and Marine Le Pen) is that pollsters did a far better job of predicting the outcome in France than they did for the EU referendum in the UK or the US Presidential election.

And it' s worth noting that the first poll released after the first round vote ended, from iPsos, sees a 62-38 outcome in favour of M Macron in the second round. That's what the FX market is going to trade off in the days ahead and indeed is already doing. The Euro is on its way (up) and risk assets and currencies are heaving a sigh of relief.

Investors have swung back into a risk-taking mode on speculation that pro-growth centrist Emmanuel Macron will become France's next president after the first round of voting.

The euro jumped the most since December and the yen retreated, while US stock-index futures rose.

The shared currency traded up by as much as 2 per cent higher to $US1.093 in early Monday trade, before easing to last fetch $US1.089. paring gains of as much as 2 per cent that took it to the highest since November. The Aussie dollar gained as much as half a penny as word emerged of a Le Pen-Macron second round contest, before paring half of those gains to last sit at 75.6 US cents.

A place for Macron in the second round avoids investors' nightmare scenario of a contest between the anti-euro Le Pen and the Communist-backed Jean-Luc Melenchon.

"This is the perfect scenario the market was desperately looking for," said Sebastien Galy, a macro strategist at Deutsche Bank.

Equities across Asia are likely to see gains as trading begins for the week, although futures pricing suggests a a flat start for the ASX. Miners should receive a boost from a 4.4 per cent jump in the iron ore price on Friday evening to $US68.22.

Gold dropped and 10-year Treasury futures fell to the lowest since April 11.

French government projections showed far-right nationalist Marine Le Pen and Macron won the first round of the election, triggering a runoff on May 7. Le Pen, who wants to take France out of the euro and clamp down on immigration, has trailed Macron, a committed globalist, in almost every opinion poll for the runoff by a margin of some 20 percentage points.

"The market will likely fully price in the outcome of the second round today in favour of Mr Macron," said Jordan Rochester, London-based foreign exchange strategist at Nomura.

"If that view is right then Emmanuel Macron ought to be the next president of France. And that in turn should be positive for the French economy and for broader European economic stability."