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Le Pen victory in French election could be bigger shock to markets than Brexit

With polls indicating the presidential election is narrower than when the two candidates faced off in 2017, traders are girding for a surprise Le Pen win, which would rattle Europe’s second biggest economy as fears of a recession in the region grow.

“It could be bigger than Brexit. It could be bigger than Trump, if Le Pen prevails,” said Michael Hewson, chief market analyst at CMC Markets.

In research published on Tuesday, strategists at Citi put the probability of a Le Pen win at 35%. Still, they encouraged clients to hedge their bets on French government bonds, and cautioned that a Le Pen win would hurt stocks.

“Uncertainty stems from the risk of low voter turnout, as leftist voters refuse to give their vote to Macron, even at the risk of handing over to Le Pen,” they wrote. “Voter turnout is a factor that pollsters find particularly hard to forecast accurately.”

Victory for Le Pen…

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