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Politics; short term outlook
Sarkozy win good news for markets - jury still out in terms of consistency of policy and the ability to deliver
May 6 outcome: Nicolas Sarkozy becomes the new president of France clear cut result: Sarkozy wins with 52.7% (2 million more votes than Royal) transition Govt will act by decree before general elections confirming Sarkozy victory 1st key financial markets’ test for Sarkozy will be the June EU summit Sarkozy's commitment to tax cuts, notably corporate tax will be put to the test shortly after the general elections. This could happen in an extraordinary parliamentary session (mid July – mid Aug), similarly the preparation of the 2008 budget law the same applies to structural reform, ie pensions, length of working life and deregulation
Asset conclusions: Sarkozy’s commitment to structural reforms goods news for stocks and the euro – notably in conjunction fiscal reforms. Outcome for bonds less clear cut.