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STOXX 600 up 0.4%

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Banks drag

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Real estate leads, up 1.4%

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Euro zone inflation eases

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ASSESSING THE IMPACT OF POTENTIAL TAX HIKES ON FRENCH STOCKS

France finally has a new government, but investor jitters remain fraught amid media reports that new PM Michel Barnier is considering increases in corporate tax and a tax on share buybacks.

Barclays equity strategists have taken a stab at assessing the impact of such potential hikes.

"According to press reports, the French government may raise the corporate tax rate from 25% to 33.5% for companies with turnover above 1 billion euros. This would be a hit of ~2.5pp on CAC 40 EPS growth for 2025," they write.

Barclays see financials, communication services/media and utilities as the most negatively exposed, though overall they say some share price pullback might already be priced in.

The CAC 40 is down 4.7% since the general election was called in early June, underperforming the broader STOXX 600

, which is virtually flat.

"For French banks in particular, our analysts see the potential tax rate increase removing up to 4% of EPS," write the Barclays strats.

BNP Paribas could see a 0.3% impact on earnings, while that figure for Credit Agricole and Societe Generale could be 0.5%, the bank said.

The trio of French banks' shares are already underperforming, down between 6%-14.3% since June 7, versus a 1.1% decline in the euro zone banks basket in that time.

Luxury is another area that could feel the pinch.

"A 1pp increase in the FY25 effective tax rate would lower EPS growth by -1.5pp for LVMH, -1.5pp for Kering and -1.4pp for Hermes."

Within utilities, they estimate the hit to EPS for Engie

at c.-0.5% and Veolia at c.-0.15%.

Media names could be particularly hard hit, especially broadcasters, says Barclays, given their lack of geo-versification.

In insurance, a 0.31% and 0.26% respective impact for Generali and Axa could be in store.

"Although French stocks have underperformed recently, they still look too high vs. the level implied by OAT spreads," say the Barclays strats.

They remain cautious on France domestic exposure amid lingering political and economic/fiscal uncertainty.

(Lucy Raitano)

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EARLIER ON LIVE MARKETS:

EUROPEAN BANKS FEEL THE SQUEEZE AS MORGAN STANLEY DOWNGRADES SECTOR CLICK HERE

LUXURY DOWN AGAIN, AUTOS STEADY AS Q4 KICKS OFF CLICK HERE

EUROPE BEFORE THE BELL: FUTURES STEADY, M&A ON THE RADAR CLICK HERE

MILDER INFLATION SEEN SETTING UP RATE CUTS CLICK HERE

(Reporting by Jesus Calero)

((Jesus.calero@thomsonreuters.com))