By Sruthi Shankar

(Reuters) – European stocks dropped Monday after surging bond yields slammed technology stocks. In France, volatility gripped blue-chip stocks as a result. The forecast for a tight race between Marine Le Pen and President Emmanuel Macron in the last round of voting was based on a prediction of Emmanuel Macron winning.

A 2.1% drop in tech stocks led to the pan-European index dropping 0.6%. The UK index fell 0.8%, while the UK’s was 0.4% lower.

Macron was in first after 40 of the opening losses were reversed. However, Ifop pollsters had predicted that a close runoff would occur on April 24th with Macron at 51% and Le Pen at 49%.

French assets have been underperforming in recent months as investors priced Le Pen’s victory into their portfolio. Markets are uneasy about Le Pen’s agenda of tax cuts, protectionism and nationalization. The CAC 40 is down 1.7%, and the STOXX 600 has risen 0.4%.

Mathieu Racheter (head of equity strategy Julius Baer) stated that he doesn’t believe the French equity markets will rally before the second round. He said, “We expect volatility and range-bound trades.”

“It’s a close call in runoff but our base scenario is that Macron is reinstated and that the market will accept quite well.”

The French Mid & Smallcap index rose 0.3%, while banks including Societe Generale (OTC:), Credit Agricole (OTC:) and BNP Paribas (OTC:) also gained ground.

Societe Generale saw a 5.8% jump after it sold its Rosbank stake.

In general, the euro zone’s banks and insurance companies gained this week as yields on government bonds climbed ahead of U.S. inflation figures and the European Central Bank meeting later in the week.

The ECB’s policymakers will likely find themselves caught in the middle of record-high inflation and economic damage from the conflict in Ukraine. However, traders continue to increase their rate increases.

The money markets have priced in rate increases of 70 basis points by year’s end, compared to 65 basis points Friday. [IRPR]

Finnish tire maker Nokian Tyres fell 12.1%, among other stocks. It said that new EU sanctions against Russia would have an important impact on production.