Forget Marine Le Pen and Jean-Luc Melenchon.
Regardless of who wins the French election, European stocks are headed for a correction, according to Deutsche Bank AG. That’s a view at odds with many of the region’s strategists who expect relief if they lose.
The Stoxx Europe 600 Index has rallied 5.2 percent this year to reach a 16-month high this week amid an improving economic and earnings outlook. That has sent valuations to 5 percent above Deutsche Bank strategist Andreas Bruckner’s fair value calculation. Paired with smaller chances of economic data surprises, that means he thinks there’s little upside for the area’s equities even if a loss by the anti-euro Le Pen removes uncertainty.
The specter of a Le Pen victory has haunted the European stock rally all year. While most polls are projecting her defeat at the May 7 runoff, investors have become warier of political surprises after the unexpected triumphs of Brexit and Donald Trump last year. Her election would spark fears over France’s exit from the single currency -- and consequently its disintegration.
Many analysts say a Le Pen loss will trigger a relief rally. As the risk of her winning has held back European stock inflows.
Source: Bloomberg
Junior Trader Stefan Panteleev
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