Borrowing costs surged across Europe yesterday after Marine Le Pen crushed Emmanuel Macron in the first round of parliamentary elections in France.

The yield on French ten-year government bonds – a key measure of how much it costs the state to borrow – hit 3.35 per cent for the first time since November last year.

They also rose in Germany, Italy and the UK amid fears lavish spending by Le Pen’s National Rally (RN) should it win power could trigger a debt crisis at the heart of Europe.

The ructions on the bond markets came as investors endured a rollercoaster ride elsewhere. 

Stock markets and the euro made strong gains in early trading on signs Le Pen may fall short of an outright majority in second-round voting on Sunday.

Kathleen Brooks, research director at broker XTB, said: ‘A hung parliament could make it hard to get anything done in France in the current parliament, which is exactly what the markets would like.’

But shares and the single currency later gave up some of their earlier advances as investors fretted over the likely result – with analysts warning of further turmoil in the days ahead.

‘Markets are looking into another week of really high uncertainty, probably fear, as it is still possible for RN to gain an absolute majority,’ said Carsten Brzeski, an economist at Dutch banking group ING.

The Cac 40 – the main benchmark on the Euronext stock market in Paris – rose as much as 2.8p per cent in early trading yesterday on hopes Le Pen will fall short. But it ended the day up 1.1 per cent.

The euro rose as high as $1.0776 against the dollar and 84.98p against sterling before fading.

‘If President Macron’s aim was to strengthen his majority by calling new elections, his gamble has backfired badly,’ said Philippe Ledent, another ING economist. 

‘Marine Le Pen’s party is still best placed to win an absolute majority, but the die is far from cast.’

Le Pen’s RN won 33 per cent of the vote in the first round of the election on Sunday. The Left-wing New Popular Front got 28 per cent and Macron’s ruling coalition was in third place with 22 per cent.

‘You have a situation between a hung parliament and a far-right government so neither of those is particularly appealing,’ said Marija Veitmane, a senior strategist at State Street Global Markets.