LIVE MARKETS-Paris in a political pickle, but stocks say ‘C’Est La Vie’ — for now

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PARIS IN A POLITICAL PICKLE, BUT STOCKS SAY ‘C’EST LA VIE’ — FOR NOW

France witnessed a latest bout of political turmoil this week, which analysts say could still be prolonged and yet equities appear to be relatively less shaken at least for now.

Despite Friday's declines, France's CAC 40 index .FCHI is heading for weekly gains that are slightly bigger than what the wider pan-european STOXX .STOXX index has managed to achieve.

"The French market remains at quite a meaningful discount to the global market and the United States," Craig Cameron, portfolio manager at Templeton Global Equity Group, said, adding that most of the larger companies have very large global international businesses, with direct exposure to France remaining quite small.

But it could all very well change if rating agency Fitch considers to downgrade the country's credit later on Friday. Zooming out, on an annual basis the CAC 40 still underperforms the STOXX 600.

"When I look at the institutional investor holdings from our custodial database, investors have a bigger position in France than overall in Europe. So there is a lot more to sell in France and overall in Europe," said Marija Veitmane, head of equity research at State Street Markets.

Earnings during the previous quarter was not impressive, either. On a country basis, second-quarter earnings fell 2.4% versus a year ago in France, according to data complied by LSEG, compared with a 4.3% growth on the broader STOXX 600.

UBS doesn't see the luxury sector - which perhaps is one of the bastions of the CAC index along with banks - as attractive either.

The brokerage called it 'a least preferred sector' citing the need for better earnings growth, which is challenging in a stronger euro EUR= and higher U.S. tariffs environment.

However, Templeton's Cameron is optimistic as he awaits the German-led infrastructure spending to kick in, saying that the spillover effects it can bring to Europe is still underestimated.

(Tristan Veyet, Johann M Cherian)

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($1 = 0.7378 pounds)