August 12, 2022

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Forecasts from Wall Street, Goldman Sachs, Citi, Societe Generale

Forecasts from Wall Street, Goldman Sachs, Citi, Societe Generale

With French voters heading to the polls on Sunday, Wall Street anticipates market turmoil if far-right candidate Marine Le Pen wins.

Timothy A. Clary | Afp | Getty Images

French voters head to the polls on Sunday to cast their ballots in the final round of a close presidential race between incumbent President Emmanuel Macron and his rival Marine Le Pen.

The centrist Macron was seen going up against his far-right opponent on Friday as the pair face the 2017 tete-a-tete rematch.

On the last day of the campaign before the second round vote this weekend, Opinion polls showed Macron leads by 57.5% over Le Pen with 42.5%.

But with the election approaching at a time of renewed economic and political pressure, both domestically and within Europe generally, the outcome is uncertain, according to Wall Street.

Here is a look at the forecasts of some of the major banks:

Goldman Sachs

Goldman Sachs has put its weight behind opinion polls, indicating 90% odds of Macron winning.

Should the incumbent succeed, investors can expect continuity within the markets — even as Macron seeks to revive his reform agenda. Such reforms are already largely implicit in current market expectations, the bank said in a research note on Thursday.

However, should Le Pen win, markets could be shocked amid growing uncertainty over France’s domestic and EU policy.

Under the French electoral system, presidential powers are dictated to a large extent by Parliament. Thus, the ultimate victor’s ability to govern will be determined by legislative elections in June, and with parliamentary unpopularity, Le Pen may face an institutional stalemate.

That could significantly hurt investor confidence, Goldman said, adding that his markets team would look for a significant expansion in sovereign spreads should Le Pen win.

City Group

Societe Generale

‘A lot is at stake’

Economists elsewhere agreed that the end result could represent a critical turning point in French politics.

“A victory for either would take France down a completely different political, economic, European and geopolitical path,” ING Economics said Thursday.

While a Macron victory would likely lead to further EU integration, a Le Pen victory would be “unfavorable to the cohesion of Europe” at a time when it faces renewed pressure from opponents in Russia.

“As France has always been one of the driving forces of European integration, the election of a Eurosceptic French president would be a rude awakening of the European Union. Not to mention the fact that Le Pen was also more skeptical of European sanctions against Russia.”

Among Le Pen’s priorities are withdrawing France from the integrated command of NATO and seeking rapprochement with Moscow – a clear departure from the broader EU position.

“This leap into the unknown could likely lead to a negative reaction in the financial markets and a highly uncertain economic path, affecting growth prospects for the coming years,” he said.

Meanwhile, the couple’s conflicting views on domestic politics could have major implications for business and foreign investment, according to Berenberg Economics.

Economists noted on Friday that “there is a lot at stake for France and the European Union”.

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