Les élections françaises? Pas de problèmes
As France concludes the final round of its presidential elections, markets are likely to remain sanguine about the results, says Pater Jarvis, co-manager of the top decile F&C European Dynamic Fund.“Although neither Nicolas Sarkozy or Segolene Royal has emerged as a clear favourite for investors, a win by Sarkozy may lead to a small relief rally in domestic stocks as on balance his policies are likely to be better for the sluggish domestic economy,” said Jarvis.
“Sarkozy has promised to cut bureaucracy and reduce the country’s debt but he is perhaps most likely to win investor votes over the future of the controversial 35-hour week, which has put French companies at a disadvantage to foreign competitors, and has failed to create new jobs. While Royal is keen to keep the 35-hour week and has even announced plans to extend it to small and medium sized businesses, a very unpopular move which could further weaken France’s position in Europe, Sarkozy has indicated in the past that he would be willing to roll it back,” added Jarvis.
The F&C European Dynamic fund has holdings in French oil giant Total, pharmaceutical company Sanofi and online house move business Seloger.com. Jarvis believes that none of his French holdings are likely to be affected by the French elections regardless of the outcome.
“Many of the large French companies have most of their exposure outside of France, so the elections are less important to us today than they might have been in the past. However, the economic outlook for France remains less attractive than elsewhere in Europe, particularly Germany. The German labour market is increasingly more efficient and the corporate recovery story has seen the German economy move from strength to strength. In 2006, the German economy grew by 22% (DAX index) and unemployment has fallen from 11.3% at the start of 2006 to 9.2% today. German stocks are also benefiting from Asian growth which is driving the strong demand cycle for German technology,” concluded Jarvis.