A ‘no' vote in France and the Netherlands on the European Constitution, along with Britain's shelving of a referendum, is likely to see European bond spreads widen in the medium term and weaken the euro on the back of political instability, say fund houses.
Investment briefings issued by Axa Investment Managers and F&C suggest while there will be no significant affect on the European investment markets as a result of the recent ‘no’ votes on the constitution, political pressure regarding the future of the European Union (EU) will weaken the euro slightly and focus attention on the budget deficits of countries with high public debts. In particular, analysts at Axa suggest the political upheaval could be “a source of instability and uncertainty”, which the markets will not like, while the lengths to which the euro will be weakened will depend...
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