* Graphic on UBS projection: bit.ly/2nqm0FN
LONDON, March 28 Euro zone stocks could crash up
to 35 percent and the euro could tumble 10 percent in the
unlikely event that far-right National Front candidate Marine Le
Pen wins the French presidential election, analysts at UBS said
The elections on April 23 and May 7 represent the main
political risk event for the euro zone this year due to the
popularity of Le Pen, who is running on a platform pursuing
France's exit from the euro and European Union, they said.
The prospect of her winning in May remains low according to
opinion polls - centrist Emmanuel Macron would trounce her in
the second round 62 percent to 38 percent, an Ipsos survey
suggested on Tuesday.
But the impact her victory would potentially have on
financial markets is "too important to ignore," said the
"The assumption of the Presidential office by a politician
whose main objective is France's exit from the euro zone/EU
implies significant and hard to predict redenomination and
default risks with potential global spill-over effects," they
said in a report on Tuesday.
"In addition, the systemic importance of France for the
European project is such that the margin for damage limitation
may well be a lot thinner than has been the case in Greece in
the past or could be the case for Spain or Italy even."
Other analysts have flagged up risks connected to a Le Pen
win, but UBS is one of the first to attach specific figures to
UBS analysts outlined two scenarios: one which roils global
markets, and one where European Central Bank backstops contain
the fallout to Europe.
The first would see the most volatility. Euro zone stocks
could fall as much as 35 percent, the trade-weighted euro lose
10 percent of its value, and high-yield European bonds fall as
much as 17 percent.
Euro zone bond spreads over German yields could blow out to
around 500 basis points in a worst-case scenario, UBS said.
Outside Europe, U.S. Treasury yields could fall as much as
100 basis points, the S&P 500 shed around 10 percent, and
emerging market stocks and currencies slide as much as 30
percent and 15 percent, respectively, they said.
If the fallout is contained to Europe, the impact on
emerging markets would be around half that of the global shock
scenario, with EM equities and currencies facing a decline at
most of around 17 percent and 8 percent, respectively.
But the hurdles to Le Pen winning and then pushing through
her more controversial plans are high. Assuming she fails, euro
zone assets could enjoy a "substantial" relief rally, with the
euro immediately jumping up to 2 percent, UBS said.
(Reporting by Jamie McGeever; Editing by Andrew Heavens)