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2017-04-21 — bloomberg.com

"The market is talking about the nightmare scenario but it's not pricing it in" said Mark Tinker, head of AXA Framlington Asia. Tinker's a GaveKal client, and admirer of Gave's tail-risk warnings over the past year. "After Sunday, we will have more information to make a considered risk-return wager to trade and hedge, but high-quality European companies and German bonds look like an attractive bet," Tinker said.

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The euro held steady on Friday and French bonds gained after a police officer was shot in Paris, which may influence the outcome of the first-round vote, according to some analysts. The CAC 40 dropped for the first time in three days, declining 0.5 percent.

The stars, however, appear to be aligning for the National Front candidate, said Gave. The fact two candidates for the runoff are likely to be determined by voters who have yet to make up their minds -- as many as 40 percent -- is a bad omen for the centrist contender, he said.

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Supporters of Francois Fillon, a center-right candidate whose momentum has been curtailed by graft charges, and a sizable chunk of Macron's followers would probably rally to Le Pen's cause if she were to face leftist Jean-Luc Mélenchon in the final round, according to Gave. He sees only Fillon with a chance to defeat Le Pen in the run-off.

If she emerges victorious, the euro would tank as markets would price in the prospect of its dissolution, rather than focus on Le Pen's legislative hurdles to exit the single-currency bloc. French and Italian bonds will be "unquotable" given vanishing bids, and the European banking system would be beset by seismic turmoil, he said.

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