Le Pen, Melenchon French Election Stock, Bond and Euro Markets Crash
Stock-Markets / European Stock Markets Apr 22, 2017 - 06:43 PM GMTBy: Nadeem_Walayat
The French people, European Union and financial markets are counting down to a potential seismic history shattering election result event, perhaps bigger than Britains' BrExit, perhaps even a bigger shock than Trump winning the US Election, for a Le Pen / Melenchon extremes of the far right and far left result would mark the starting point for the DEATH of the Euro-zone and soon afterwards the European Union.
The market consequences of which will me immediate and severe as the French stock market would literally haves sleep walked into such an election outcome. The CAC40 would crash by at least 10% and probably by more than 15% triggering a contagion plunge across the worlds stock markets as the financial shockwave's rippled out from Paris.
And similarly the euro has remained stable all year, which means the market is primed for a shock wave event that could send the Euro plunging to a new low for 2017, which could even be along the lines of that which Sterling suffered in the aftermath of BrExit of upwards of 10% plunge. A huge move for one of the worlds major reserve currencies as the markets started to discount the possibility of the death of the Euro!
French and most other european bond markets would crash sending interest rates soaring, the only nation to buck the trend would likely be the German bond market as investors would rush to buy German bund's.
A Run on French Banks?
Stocks, bonds and the euro plunging could trigger panic amongst French savers, who fearing the worst rush to draw their savings out of the French banks triggering a run on the banks acting to pour fuel onto the crisis that could see the Euro-zones second largest economy introduce capital controls along the lines of the Greek debt crisis, limiting the amount of euros that french bank customers can draw at ATM's and cashiers. This would be disastrous for confidence in the French economy that would enter a death spiral result in a loss of GDP even worse than experienced in the aftermath of the financial crisis.
As a reminder, Le Pen would seek to take France out of the Euro-zone via a FrExit EU referendum and is so far to the right that she emerges on the far left with many of her polices appearing to match that of the extreme left Melenchon, anti-market, anti-free trade, where Melenchon like Le Pen is also anti-German pro Putin and would seek to impose a host of anti-market pro socialism reforms including a 100% tax rate on those earning above e360,000 triggering a French recession, and where his policies of stimulus through printing hundreds of billions of euro debt would also inevitably mean France would be forced to leave the Euro-zone, as the ECB controls the printing of Euro's and not the central banks of Euro zone members.
Therefore a Le Pen vs Melenchon first round outcome would result in an immediate blood bath on the financial markets, the Euro would plunge and the CAC40 stocks index would crash, sending euro bond markets into free fall as interest rates soared.
As for what I deem to be the most probable outcome for both the first and second rounds of the french presidential election, see my most recent video analysis -
The BrExit War
The BrExit war series of videos is based on my following in-depth analysis that explain what Britain needs to do to win the BrExit War that the UK is engaged in with the European Union.
- The Brexit War! EU Fearing Collapse Set to Stoke Scottish Independence Proxy War
- The BrExit War, Game Theory Strategy for What UK Should Do to Win
Ensure you are subscribed to my always free newsletter for my latest analysis and to our youtube channel for videos in the BrExit War series.
By Nadeem Walayat
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Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.
Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
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