Le Pen or Melenchon election victory would trigger a correction, Citi says
(ShareCast News) - The most likely outcome of the French elections was a victory for either the centrist or centre-right candidates, Emmanuele Macron and Francois Fillon, strategists at Citi said.
Yet there is a non-negligible risk that either the far-right FN's Marine Le Pen or the far-left Jean Luc Melenchon might come out on top, triggering a correction in both European and French stocks of between 5% to 10%, the investment bank said.
Citi put the odds of a Macron victory at 35% while the probability of Fillon overcoming was seen at 30%.
Le pen's chances of becoming president were pegged at 25% with Melenchon at 10%.
Conversely, a win for either Fillon or Macron could entail between 10% to 20% upside to the end of 2017.
"A risk-off outcome would mean our Overweight stance on Continental Europe would suffer. US equities should outperform, as in the 2012 EMU crisis. Amongst sectors, defensives are likely to outperform."