German Stocks Show More Promise Than French Due To Political and Fiscal Concerns

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Economics And Finance News

GERMAN STOCKS,FRENCH ECONOMY,BORROWING COSTS

Barclays' strategists suggest German blue-chip stocks are more promising than their French counterparts, citing France's weak long-term fiscal and growth fundamentals, political uncertainty, and the risk of rising borrowing costs.

German blue-chip stocks show more promise than their French counterparts, Barclays' strategists wrote in a note Friday, saying France has weak"long-term fiscal and growth fundamentals" and a looming risk of bond vigilantes sweeping in.

, given its fiercely divided parliament in which no party or faction has a majority. There are also investor concerns over whether it can reduce its hefty debt pile and— which includes significant public spending cuts and 60 billion euros in tax hikes — or whether it will be toppled in a no-confidence vote beforehand."Compromise on the French budget remains possible. But any relief may be short-lived.

However, if the government falls, that spread could widen toward 100 basis points and drive the CAC down by between 4% and 5%, they warned, and"bond vigilantes would likely step in the event of no stable government forming" or if the budget fails to pass. Beyond the short-term budget debate, Barclays found medium-term risk asymmetry was"not great" for French markets, and that"concerns about political instability and long-term fiscal trajectory may persist."Jane Foley, senior FX strategist at Rabobank, is not convinced.

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