LIVE MARKETS-France's long road ahead

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FRANCE’S LONG ROAD AHEAD

Worries about France have become a bit more subdued recently after fiscal and political risks saw French assets being repriced sharply in September and October.

But, Barclays point out that the path to the 2027 elections is still long and uncertain, and keeping that in mind, they’ve taken a look at pricing, risks and opportunities.

Starting with French government bonds, they argue that while a lot might already be priced in, “the end-game for OATs still appears skewed toward cheaper yields and wider spreads as support from the ECB may not come anytime soon.”

The make-up of the next Presidency and Parliament, and their willingness and ability to make fiscal tweaks will be key to improving credibility, the note said.

Then there’s equities: again, Barclays say a good bit of risk is already being priced in — but “the key catalyst will be whether early-2027 polls reinforce the prospect of a Le Pen-Mélenchon run-off, potentially reviving market concerns, or point to the emergence of a more market-friendly alternative.”

And finally, there’s the euro, with French risks turning out to be a major headwind for the common currency in recent months. According to Barclays, that risk is sticking around for the foreseeable: “the risk of renewed OAT spread widening will likely remain a drag on the EUR until a clearer post-election path emerges - probably much closer to the Presidential election itself.”

(Sophie Kiderlin)

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