As political uncertainty drives down prices… Let’s look at some prominent artists in Europe

France should be excited about the start of the Paris Olympics later this month. However, the country is in turmoil following a deadlocked election.

There are fears of a market crash if the far left, which won the majority of votes in last weekend’s election, forms a government and announces big spending plans, at a time when public finances are already dangerously stretched.

A parliament without an absolute majority, without a clear agenda, would also be dangerous for investor confidence.

Such outcomes would also send shockwaves through the rest of the eurozone, thanks to the bloc’s monetary and fiscal ties.

Jamie Ross, co-director of the Henderson European Trust, comments: “Political uncertainty in France is political uncertainty at the heart of the EU.”

So what does this mean for Europe’s pharmaceutical, software and other companies, which are considered the closest thing to the “Magnificent Seven” U.S. tech stocks?

Earlier this year, US banks praised the virtues of these businesses.

Citi announced its ‘Super Seven’: ASML, Ferrari, LVMH, Novo Nordisk, Richemont, Schneider Electric and SAP.

Goldman Sachs recommended “the Granolas”: GlaxoSmithKline (GSK), Roche, ASML, Nestlé, Novartis, Novo Nordisk, L’Oreal, LVMH, AstraZeneca, SAP and Sanofi.

This actually spells ‘Grannnolass’ and includes two UK names, GSK and AstraZeneca.

But Goldman describes them as “quality, internationally exposed growth players,” suggesting they have the “je ne sais quoi” to transcend the turmoil.

If you want to take your chance in Europe this Olympic summer, here’s what you need to know.

THE PERSECTIVE

Volatility is a threat as Germans go to the polls in October. Ross says: ‘The German public is increasingly influenced by the far right, which could reach a vote share of between 15 and 18 percent.

“A strong EU needs a stable political situation in France and Germany, and this is certainly in question at the moment.”

However, he argues that European markets are now dominated by “companies that are exposed to global structural trends, not to internal European politics.”

Ross continues: “These markets now have greater exposure to semiconductors in the form of Dutch group ASML, which makes the machinery to make chips, and more global pharmaceutical companies, such as Novo Nordisk and weight-loss drug group Ozempic.”

Henderson European Trust offers exposure to ASML, Novo Nordisk, German software group SAP and French industrial automation company Schneider.

The fund’s shares are at an 8 per cent discount to their net asset value (NAV), suggesting it could be a cheap way to follow Europe’s stars. Other successful buy-side funds include Fidelity European. But if you’re interested in backing individual stocks, here are some stocks that fund managers have their eye on.

ACTIONS TO FOLLOW

BEAUTY

Brands owned by €214bn (£180bn) beauty giant L’Oreal range from luxury Aesop and Lancome to cheap and cheerful Maybelline and Cerave, which is a hit with Gen Z. Nicolas Hieronimus, L’Oreal’s chief executive, says global market growth this year for these and other brands could be 4.5 to 5 per cent, rather than 5 per cent as previously forecast.

But this is not due to the summer of unrest in France, but rather to a slowdown in China.

The stock is down 8.4% this year to €412.60, but analysts are optimistic: the average target price is €450, but one optimist says it could reach €526.

ENTERTAINMENT

Joe Bauernfreund, manager of the AVI Global trust, describes the Bolloré Group, a family-controlled French conglomerate valued at €15.5bn (£13bn), as “one of the last Byzantine corporate structures in Europe”.

Among its various holdings are Universal Music and Vivendi, owner of the Canal+ television channel, and the Havas advertising agency. Bauernfreund will increase the trust’s stake in Bollore, arguing that “political instability has provided an opportunity.”

LUXURY

LVMH, the French giant behind brands such as Tiffany and Louis Vuitton, will be in the spotlight as the title sponsor of the Olympics.

But its shares have fallen 16 percent in a year amid weakening demand for handbags and knick-knacks.

This could be a good time to take a closer look at L’Oreal, says Gerrit Smit, manager of the Stonehage Fleming Global Best Ideas Equity fund.

He argues that it is not a national company, but a truly global operator.

Smit says the same about Essilor Luxottica, the world leader in eyewear and sunglasses, thanks to its Oliver Peoples, Persol and Ray-Ban brands.

TECHNOLOGY

ASML shares have risen more than 50 percent to €1,002 over the past 12 months, fueled by enthusiasm for generative AI (artificial intelligence).

However, analysts still rate the company as a buy, with some analysts pointing to a price of €1,302.

Smit says the €386bn (£324bn) group will benefit from the relocation of semiconductor capacity to the West, and specifically the US.