French stocks: a relief rally on Monday?
STOXX 600 up 0.7%
Banks top gainers
UK heads to polls
Wall Street on holiday
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FRENCH STOCKS: A RELIEF RALLY ON MONDAY?
Bond markets have been rather quick to adjust to the reduced risk of Marine Le Pen's Rassemblement National (RN) winning an absolute majority in the French parliament.
Stocks, however, remain near the lows reached last month after President Emmanuel Macron's surprise announcement of snap elections.
This discrepancy has created a potential opportunity for equity investors, according to Morgan Stanley. The U.S. bank expects the relief bounce already seen across fixed income to broaden to equities once results of this Sunday's second round of voting becomes clear.
In short, MS believes it's now "time to buy" French stocks.
"We recommend equity investors follow the lead of fixed income assets, pre-second round results," write a team of economists and strategists at the investment bank.
"We believe the two key remaining French election scenarios – no majority and RN absolute majority – would both ultimately be followed by a recovery in French and wider-European equities indices," they add.
(Danilo Masoni)
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