Markets are putting a new price on French risk after decades of budget deficits and steadily rising debt, with investors charging much more to hold government bonds, the stock market under pressure and the cost of insuring bank bonds against default jumping. The euro fell to its weakest level since May 2025 on Monday, reflecting fears that the upheaval will spill beyond France's border. Deutsche Bank Vice Chair for Global Macro Ozan Tarman said the French storm got messier last week as it began spreading into European credit toward Germany and beyond, and that he does not think it is over yet, warning there may be more days like last Thursday and Friday. He said the ECB will not let the situation become too systemic, though he expects markets to treat any intervention as a selling opportunity for the euro, with most people seeing it going to 109 before 115. On US equities, Tarman said he would not be surprised if Deutsche Bank's Binky Chadha upgrades his 8,000 year-end S&P 500 forecast soon, citing bottom-up expectations of roughly 27% earnings growth in the next season, and said that gun to his head he sees 8,200 before 7,400. He added that he favors emerging markets, particularly long Latin America versus short Asia, with long Brazil and short India a consensus trade he expects to keep delivering.
Deutsche Bank AktiengesellschaftFrench fiscal risk premium and debt fears drive the euro to its weakest since May 2025, with markets seen selling euro rallies toward 1.09.
