Analyst who predicted Trump win bets on Le Pen

Don’t bank on a relief rally in the euro area anytime soon.

Markets are underpricing the prospect of Marine Le Pen emerging victorious in the French election as a sea of undecided voters throws into sharp relief pronounced apathy for centre-leftist Emmanuel Macron — the front-runner by a whisker — and the backlash against the European Union project.

That’s the conclusion drawn by Charles Gave, founder of Hong-Kong asset-allocation consultancy GaveKal Research, who predicted the triumph of Donald Trump in the American election, and is now betting on a win for the anti-euro National Front candidate.

“Le Pen’s momentum is a slowmoving reaction against the men of Davos — as we have seen with Brexit and Trump — but markets don’t want to believe it,” he said before the first round of the French poll on April 23.

Markets are pining for a scenario that would preserve the status quo: Macron, an independent candidate, defeating Le Pen in the second round on May 7.

Gave, however, said the stars appeared to be aligning for the National Front candidate. The fact that the two candidates for the runoff were likely to be determined by voters who had yet to make up their minds — as many as 40 per cent — was a bad omen for the centrist contender, he said.

At least half of the far-left and half of the centre-right wouldn’t vote for Macron in the second round if he was pitted against Le Pen, believing he is “tainted” by his association with Francois Hollande’s Government, and would rather abstain, Gave said.

Supporters of Francois Fillon, a centre-right candidate whose momentum has been curtailed by graft charges, and a sizeable chunk of Macron’s followers would probably rally to Le Pen’s cause if she were to face leftist Jean-Luc Melenchon in the final round, according to Gave. He sees only Fillon as having a chance to defeat Le Pen in the run-off.

If Le Pen emerged victorious, the euro would tank as markets would price in the prospect of its dissolution, rather than focus on Le Pen’s legislative hurdles to exit the single-currency bloc, he said. French and Italian bonds would be “unquotable” given vanishing bids, and the European banking system would be beset by seismic turmoil.