So at least for Monday, the verdict is already in on European stocks and how traders feel about the first round of the French elections.
More specifically, this is how they feel:
Right. Not a whole lot of ambiguity there.
But, on the off chance you want to peruse Wall Street’s projections, below find a bullet point summary of opinions on eurozone equities going forward.
- Citi strategists including Jonathan Stubbs in note
- European banking sector likely to benefit from lower political risk premium and narrower sovereign spreads following “risk-on” outcome in first round of French election
- Says French banks could outperform by ~10% in short term, broader sector likely to be key leadership group in market
- Lower political risk could “release handbrake” across policy makers, CEOs, investors and individuals; expects international investors, particularly U.S., to return to European equities
- Goldman Sachs equity strategist Peter Oppenheimer, in note
- Equity market has already largely priced the outcome; concerns about the vote have not prevented European equities and CAC 40 from performing well on an absolute basis in 2017
- Expect the results to generate some relief for FTSE MIB, French and Italian banks, and a very minor relief for CAC 40
- French domestic stocks and CAC 40 have not underperformed significantly as of late; Goldman doesn’t expect them to rally materially now, or after second round
- BlackRock strategists including Richard Turnill, in note
- Result is positive surprise for risk assets in near term
- Business-friendly and pro-European Macron, who has maintained large winning margin in head-to-head polls with Le Pen, can now build on his momentum
- Result should lead to material reduction in perceived political risk in Europe; some risk premium should linger until legislative elections in June
- If Macron becomes France’s next president, may struggle to implement his agenda without stable parliamentary majority
- Expects Italy to be the next focus of European political risk
- Makor Capital Markets strategist Stephane Barbier de la Serre, in emailed comments
- Le Pen comes a close second, however the math of vote redistribution will simply not work for her and therefore expect Macron to win the run-off with a wide margin
- It does dispel at once the risk of any kind of “Frexit” in the foreseeable future, which should lead to much reduced risk premia on French stocks and bonds and therefore boost prices of all European risk assets in the next few weeks
- Jefferies strategists Sean Darby and Kenneth Chan, in note
- Although the electorate should not be taken for granted running into the second round, markets will applaud a Macron victory in early May given his pro-European inclination and reformist agenda
- Jefferies remain bullish on French stocks within its global asset allocation, says French financials have seen decent upward earnings and target price revisions through 1Q
- Mirabaud Securities strategists, in note
- Among the sectors which should benefit the most from the result are: French banks, retailers, carmakers, mid-cap stocks; while companies more exposed to international markets such as tech, luxury, beverages and defense should benefit less
- Nomura strategists, in note
- If Le Pen had won the most votes in the first round, this would have raised the possibility that the runoff would result in an anti-EU president, but given outcome, Nomura thinks a Le Pen presidency can be safely relegated to a risk scenario
- The reduced probability of France abandoning the euro should be a straightforward positive for financial markets
- Degroof Petercam strategist Bruno Colmant, in emailed comments
- Overall, the systemic risk is set to drop significantly
- Macron’s key to success if he becomes president will be to restore a political dialogue between France and Germany, which could lead to stronger fiscal stimulation; this would be extremely positive for equity markets
I suppose all one can say about that is that everyone better hope the pollsters are right about the second round.