UBS with a not very uplifting view on the outcome of the French election for investment certainty.
In brief:
- large number of second-round votes could be three-way contests
- makes the final outcome harder to predict
- its not clear how many third-placed moderate candidates will withdraw to form a “front républicain” to increase the chances of defeating a more extreme party
- seems less likely that one group will have a majority after the second round, but investors would be unwise to place too much confidence in that
- a weaker minority government is unlikely to tackle France’s fiscal situation
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The ECB may be in to bail out French bond holders. Or not. They will if they have to. Its what they do.
