Goldman and Citi See European Stock Rally Surviving French Drama

The risk of another failed government in France is already priced in by markets and won’t be enough to derail the best year for European equities relative to US stocks in almost two decades, according to top Wall Street strategists.

While French Prime Minister Francois Bayrou’s surprise decision on Monday to call a confidence vote over a budget showdown has rattled investor sentiment, market strategists at Goldman Sachs Group Inc., Citigroup Inc. and JPMorgan Asset Management said contagion risks to the rest of Europe are low given historic fiscal reform in Germany and a resilient economic growth outlook for the region overall.