Manxman Kennaugh finished safely in the bunch after French sprinter Nacer Bouhanni (Cofidis) took the stage victory ahead of Samuel Dumoulin (Ag2r) and Sacha Modolo (Lampre-Merida).
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Stage one winner Kennaugh sits two seconds ahead of Modolo overall with Bouhanni in third, also at two seconds.
The day’s escape group formed just after the start in Le Bourget-du-Lac, comprising Perrig Quéméneur (Europcar), Daniel Teklehaimanot (MTN-Qhubeka) and Arnaud Courteille (FDJ) after Courteille initiated the move.
The trio continued out front for the entire race, only getting caught with three kilometres to go. King of the Mountains leader Teklehaimanot increased his position in that classification by taking maximum points over the second category Col du Chat and first category Col de Cuvéry.
Crashes once again punctuated the day, with a notable stack at 21km to go that caught out Joaquim Rodriguez (Katusha) and Thomas Voeckler (Europcar) among many others. Rodriguez and Voeckler had to chase back up through the team cars to regain contact with the peloton.
A succession of teams tried to take control of the bunch in the nervy final kilometres, with MTN-Qhubeka heading the field under the kilometre-to-go marker. MTN’s Edvald Boasson Hagen duly opened up his sprint early, but Bouhanni came around to take the victory as Boasson Hagen faded. Kennaugh rolled in at 26th position to keep his race lead.
On Tuesday, the riders face stage three: a 24.5-kilometre team time trial from Roanne to Montagny, which should see the general classification get shaken up.
Critérium du Dauphiné 2015, stage two: Le Bourget-du-Lac to Villars-les-Dombes, 173km
1. Nacer Bouhanni (Fra) Cofidis
2. Samuel Dumoulin (Fra) Ag2r
3. Sacha Modolo (Ita) Lampre-Merida
4. Edvald Boasson Hagen (Nor) MTN-Qhubeka
5. Alexey Tsatevich (Rus) Katusha
6. Jonas Van Genechten (Bel) IAM Cycling
7. Jens Keukeleire (Bel) Orica-GreenEdge
8. Ramunas Navardauskas (Ltu) Cannondale-Garmin
9. Yannick Martinez (Fra) Europcar
10 Luka Mezgec (Slo) Giant-Alpecin all same time
26. Peter Kennaugh (GBr) Team Sky at same time
Overall classification after stage two
1. Peter Kennaugh (GBr) Team Sky
2. Sacha Modolo (Ita) Lampre-Merida at 2 secs
3. Nacer Bouhanni (Fra) Cofidis at 2 secs
4. Samuel Dumoulin (Fra) Ag2r at 6 secs
5. Edvald Boasson Hagen (Nor) MTN-Qhubeka at 8 secs
6. Tiesj Benoot (Bel) Lotto-Soudal at 12 secs
7. Yannick Martinez (Fra) Europcar at 12 secs
8. Jay McCarthy (Aus) Tinkoff-Saxo at 12 secs
9. Ramunas Navardauskas (Ltu) Cannondale-Garmin at 12 secs
10. Julian Alaphilippe (Fra) Etixx-QuickStep at 12 secs
Video: on-bike footage from stage one of the Critérium du Dauphiné