Europe builders seen up, defense down if Obama wins

LONDON (Reuters) - European building materials and construction stocks could be big gainers from a Barack Obama win in Tuesday's U.S. presidential election, while defense companies would get a boost if rival John McCain won, analysts said.

Democrat Obama led Republican McCain in five of eight key battleground states, according to a series of Reuters/Zogby polls as the two candidates face the verdict of U.S. voters following a long and bitter campaign.

"Obama would spend a lot of money on the public sector, which would be good for road builders. A landslide Obama win would also be good for retailers because it would come with a feel-good factor that would boost consumer spending," said Mark Bon, fund manager at Canada Life.

Analysts said the concrete details of Obama's plans for the economy would have a big bearing on which stocks would benefit.

"A lot hinges on the flavor of what the stimulus is. If it's going to be just tax cuts, in which case people are going to look at some of the discretionary end of the consumer spend. Potentially leisure and retail could do well," said Philip Lawlor, chief portfolio strategist at Nomura.

"My read is that it's going to be a big package of $150 billion but it's much more skewed toward infrastructure, in which case once the legislation starts to come through people will realize this has to be beneficial for the construction stocks and material stocks."

Societe Generale said in a note late last month that it expected European commercial banking, construction, healthcare equipment and insurance to benefit from an Obama win.

It picked CRH, Holcim and Lafarge as potential winners among the construction companies, while BBVA and Santander would be gainers among the banks as opportunities arose to buy U.S. regional banks.

"A new president with a clear mandate would also be good for the dollar, and that would boost European exporters," Bon said.

Aerospace and defense, pharma, investment banking and asset management, luxury goods, oil, chemicals and nuclear energy could gain from a McCain win.

SocGen picked defense groups BAE Systems, Cobham, drugmakers AstraZeneca and GlaxoSmithKline and Credit Suisse and UBS in the investment banking and asset management universe.

It said luxury goods group LVMH, oil producers BP and Royal Dutch Shell, industrial gases group Air Liquide and nuclear energy players Areva, EDF and GDF Suez would also be likely winners under McCain.

Whatever the outcome, analysts said that the progress of a $700 billion financial stimulus program agreed under outgoing President George W. Bush would be key.

"We do think it opens the way as well, more fundamentally and more relevantly for equity markets at this juncture, for a speed-up in the fiscal stimulus program. That is what we will really be looking at," said Ian Richards, strategist at Royal Bank of Scotland.

(Reporting by European Stock Market team; Editing by Chris Wickham)