Tuesday: As French Say Adieu to '80s, Market Yawns

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By Andrew Morse
Staff Reporter

Vive le Dow

! Or is it

la

Dow?

Forget the "special relationship" the U.S. and the U.K. are supposed to have. It's the relationship between America and France that has the market jawing today.

America's earliest allies -- the French sent troops and aid when the Colonies broke away -- were roiling the currency markets this weekend. In Sunday's preliminary election, the well-heeled French handed the Socialists a surprise victory. The win came as a surprise to pollsters who had given strong odds to the center-right government of Alain Juppe. He's already resigned.

"There is a crypto-liberal rollback of the Reagan-Thatcher conservatism of the '80s," says Fred Sturm, chief economist at

Fuji Securities

in Chicago. "We have Clinton in the U.S., Blair in the U.K. and now this."

Fabulous, you say. The French, like the Americans and British before them, are undoing the '80s. No more power ties. No more listening to

Wang Chung

and

Culture Club

. But what has it got to do with the stock market?

Get a croissant and a cappuccino, Pierre.

A liberal government in France could slow the pace of that heavily regulated country's privatization plans. That, the skeptics say, could mean greater debt, which would risk a failure by Paris to meet the Maastricht criteria for greater European cooperation. In turn, that could jeopardize the European monetary union. And that could mean European money -- francs, marks and pounds -- will look for more stable investments like, you guessed it, U.S. Treasuries.

Sound far-fetched? France's

CAC-40

, the benchmark index, dropped 3.9% on the results and French investors were said to be dropping OATS (French government bonds,

idiote

) and running to British gilts, U.K. paper.

Sacre bleu.

Still, U.S. markets were unmoved by the news. After taking a well-deserved holiday to commemorate America's men and women of uniform -- as well as this year's 20 record closes -- the Dow is hovering around its starting point, still groggy, perhaps, from the Buds and burgers at Monday's seasonal grillout.

Even in the face of merger chatter concerning two telecommunications companies,

AT&T

(T) - Get Report

and

SBC Communications

(SBC)

, the potato-salad-stuffed market could muster only a small rise.

Perhaps the muted reaction -- each company rose a mere dollar -- was premised on concern regulators might put the kibosh on the deal. Remember the hoops

Bell Atlantic

(BEL)

and

Nynex

(NYN)

had to jump through to get their merger approved?

Another potential merger in the making: Consumer lender

Beneficial

(BNL)

was cited as a possible takeover target by

Prudential Securities

analyst Michael Durante, according to

American Banker

. Cited as interested:

Associates First Capital

(AFS)

. Durante's reasoning, according to the banking industry newspaper, is that Beneficial has a strong branch network but high costs that an acquirer could easily trim. Beneficial's stock was up 3/4 at 64 1/2, while Associates First was trading at 46 5/8, off 1/4.