There is a paradox doing the rounds among European investors - they list uncertainty about the US presidential election as a key driver of financial markets but then add it does not make much difference who wins.

Neither Republican George W. Bush nor Democrat John Kerry, it is argued, will want to - or be able to - do much about the structural imbalances in the US economy that so worry European investors, mainly the twin current account and budget deficits.

The result is that from an investor standpoint, while there may be some immediate market volatility after voting day, the election is not likely to have much impact on long-term European strategies or asset allocation among stocks and bonds.

"Both Kerry and Bush are running on budgetary platforms that lock in most of the structural deterioration in the deficit seen over recent years," Britain's Schroder Investment Management said in a special report on the election.

"The size of the budget deficit is therefore likely to remain a serious concern regardless of who wins the 2004 presidential election."

The election is nonetheless widely cited by market players at the moment as a leash - compounded by geopolitical worries, rising interest rates and signs of economic weakness - that is keeping many markets in relatively narrow ranges.

It is seen as curbing the appeal of equities, supporting government bonds and keeping the dollar from moving significantly one way or the other.

Andreas Utermann, global chief investment officer for German-owned asset manager RCM reckons one impact of this will be that markets will use the election result - whatever it is - as an excuse for short-term moves.

"The US election in itself will not make much difference, but people are looking for a catalyst," he said.

Longer-term, though, European investors are focused firmly on what they see as threats from the US twin deficits as sources of instability to the welfare of global growth.

There is nothing particularly new about this focus, which tends to be more of an overseas obsession than a US one.

"The Europeans take an extremely dim view of the imprudent behaviour of any US government," said Mike Lenhoff, chief strategist at British wealth manager Brewin Dolphin Securities. "They have always considered Americans to be profligate."

But what is exercising particular concern at the moment is the impact of the deficits on currencies and interest rates as Europe struggles with a fragile recovery.

The current account deficit is seen driving the dollar lower and, by consequence, making the euro too strong to be competitive, stifling growth.

The budget deficit, meanwhile, is seen driving interest rates higher by requiring continual funding in the form of more US bond issues. That would, in turn, raise costs for US companies and hurt equities.

Strategists, however, see no sign of either Mr Bush or Mr Kerry taking action to cut the deficits. Mr Bush, it is argued, is likely to make past one-off tax cuts permanent, while Mr Kerry would end the tax cuts but use the savings for his health care proposals.

Some give Mr Kerry the nod as most likely to do something about the deficits. But it is also widely accepted that tax hikes and spending cuts would be hard to get through Congress.

As for launching new policies that might impact on financial markets, both men are seen as strapped because the surplus Mr Bush inherited in 2000 has gone.

"This time, whoever wins has far less choice. The room for manoeuvre is much lower," said Andrew Clare, economic consultant to Britain's Legal & General Investment Management.

"I don't think that it (the election) is a huge event."

One exception may be at the equity sector level. Mr Bush would probably keep things much the way they are, but Mr Kerry is seen as likely to try to institute some form of healthcare reform, impacting pharmaceutical sector stocks.

"If Kerry comes to office he would try to help companies that make generic drugs," said Franz Wenzel, senior strategist at France's AXA Investment Managers.

"That would put a lot of competition on old settled (drug) companies and push prices down."

But Mr Wenzel also says is an issue only on the margins for most European investors.

"From a macroeconomic level, (who wins) doesn't make a difference." he said.