French election scenarios
STOXX 600 up 0.3%
French stocks underperform
Eyes on PCE
Wall St futures higher
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FRENCH ELECTION SCENARIOS
Analysts at Citi have crunched the numbers to assess the potential equity market impact from various election scenarios, concluding that markets may be overly optimistic about the election, despite the underperformance since June 9.
France's CAC 40 has fallen 6.2% since Macron called the election, underperforming the STOXX 600, which is down 1.8%.
Citi outlines three potential scenarios:
1/ "Benign" outcome - centrist coalition or constrained right-wing and assigns a 20% probability
2/ "Gridlock" - where fiscal risks persist (40% probability)
3/ "Extremes" - Right- or left-wing majority (40% probability)
"We find that French equities (currently ~13.5x fwd PE) are pricing in a relatively market-friendly election outcome, somewhere between our “benign” and “gridlock” scenarios," Citi said in a note on Thursday.
"A “benign” outcome could see French equities re-rate up to 5%, “gridlock” could see a 5-10% de-rating, and “extremes” could lead to a 10-20% de-rating."
Further complicating matters could be if Macron were to resign, which would likely "be market unfriendly", Citi says.
Citi's expectations for markets in the various scenarios are laid out below:
“Reprinted with permission of Citi Research. Not to be reproduced.”
(Samuel Indyk)
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FRIDAY'S OTHER LIVE MARKETS POSTS:
STOXX 600 UP, CAC 40 DROPS BEFORE ELECTION CLICK HERE
EUROPEAN EQUITY FUTURES HIGHER CLICK HERE
ALL ROADS LEAD TO THE DOLLAR CLICK HERE
Inflation in Tokyo accelerates https://reut.rs/3xsJCC6
CAC vs STOXX https://tmsnrt.rs/3VZd8J1
European shares mixed, France underperforms https://reut.rs/3W2oFHB
Citi market scenarios https://tmsnrt.rs/3XJvQps
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